Ramon A. Garcia and Bertha E. Garcia - Page 14

                                       - 14 -                                         
             section 72(p)(2)(C) that was added to the Code by the 1986               
             Act applies to the 1986 loans because the loans were                     
             modified after December 31, 1986.  See 1986 Act, sec.                    
             1134(e), 100 Stat. 2085, 2484.  Petitioners further reason               
             that because the level amortization requirement applies to               
             the 1986 loans, the interpretation of section 72(p)(2)(C)                
             contained in a proposed regulation issued under the 1986                 
             Act also applies to the loans.  This proposed regulation                 
             provides as follows:                                                     

                       Q-10.  If a participant fails to make                          
                  installment payments required under the terms                       
                  of a loan that satisfied the requirements of                        
                  [section 72(p)(2)] when made, when does a deemed                    
                  distribution occur and what is the amount of the                    
                  deemed distribution?                                                
                       A-10.  (a) Timing of deemed distribution.                      
                  Failure to make any installment payment when due                    
                  in accordance with the terms of the loan violates                   
                  [the level amortization requirement of] section                     
                  72(p)(2)(C) and, accordingly, results in a deemed                   
                  distribution at the time of such failure * * * .                    
                       (b) Amount of deemed distribution.  If a                       
                  loan satisfied [the requirements of section                         
                  72(p)(2)] when made, but there is a failure to                      
                  pay the installment payments required under the                     
                  terms of the loan * * *, then the amount of the                     
                  deemed distribution equals the entire outstanding                   
                  balance of the loan at the time of such failure.                    
                  [Sec. 1.72(p)-1, Q&A-10, Proposed Income Tax                        











Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011