Milo G. and Sarah E. Chapman, et al. - Page 19

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                  making comparable loans, Z's subsequent use of the loan                                
                  proceeds will not affect the determination of whether                                  
                  loans under P's program satisfy the conditions of                                      
                  section 408(b)(1).  [Emphasis added.]                                                  
                  Petitioners misconstrue the scope of 29 C.F.R. sec.                                    
            2550.408b-1.  Section 406(a)(1)(B) of the Employee Retirement                                
            Income Security Act of 1974 (ERISA), Pub. L. 93-406, 88 Stat.                                
            879, generally prohibits loans between a plan and a party-in-                                
            interest.  Section 408(b)(1) of ERISA exempts loans to                                       
            participants and beneficiaries if the loans meet certain                                     
            requirements.  The ERISA sec. 408(b)(1) exemption of ERISA                                   
            parallels section 4975(d)(1).  29 C.F.R. sec. 2550.408b-1(v).                                
            The regulation merely explains the circumstances in which these                              
            exemptions are available for purposes of ERISA sec. 408(b)(1) and                            
            section 4975(d)(1).8                                                                         
            The examples in 29 C.F.R. sec. 2550.408b-1 are merely                                        
            illustrative of those circumstances; they do not purport to limit                            
            the situations in which section 72 may apply or to describe the                              
            income tax consequences of loans from a qualified profit-sharing                             
            plan.                                                                                        
                  We are satisfied that this is not a case in which                                      
            petitioners are entitled to avoid the tax consequences arising                               


                  8ERISA and the Code provide an exemption from the prohibited                           
            transaction rules where loans are available to all participants                              
            on a reasonably equivalent basis, are not available to highly                                
            compensated employees in greater amounts, bear a reasonable rate                             
            of interest, and are adequately secured.  See 29 C.F.R. sec.                                 
            2550.408b-1 (1989).                                                                          




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