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outstanding loan balance of $50,000 despite the $10,000 loan
payment which Dura-Craft made to David Christie in 1985.
Accordingly, as of the date of its payment, Dura-Craft owed
interest to Milo Chapman and David Christie in the amount of
$33,000 rather than the $37,185 which was paid.
On February 22, 1986, the loan principal and interest due to
the Plan for each of the plan loans exceeded the statutory limit
of $50,000, pursuant to section 72(p)(2)(A)(i). Total interest
of $9,000 and $3,000 accrued on the plan loans during 1988 and
1989, respectively.
The Chapmans and the Christies did not report any income
with respect to the corporate or plan loans. Respondent
determined that the Chapmans and the Christies each received two
plan distributions from the Plan pursuant to section 72(p): (1)
In 1988, in the amount of the principal balance of $37,500 and
one-half of the accrued interest ($4,500), and (2) in 1989, in an
amount of one-half of the interest accruing during that year
($1,500). In addition, respondent determined that petitioners
were liable for an additional 10-percent tax pursuant to section
72(t) on each distribution.
Respondent also determined that the Chapmans and the
Christies each received the following amounts of income in 1989:
(1) Dividends from Springbrook equal to one-half of the
difference between interest of $14,000 owed by Springbrook on its
corporate loan and the $18,315 actually paid by Springbrook to
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