Milo G. and Sarah E. Chapman, et al. - Page 8

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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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