Milo G. and Sarah E. Chapman, et al. - Page 22

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            loans are repaid is an additional distribution pursuant to                                   
            section 72(p)(1).9                                                                           
                  For clarity, we will address separately the applicability of                           
            section 72(p)(1)(A) to the principal and accrued interest of the                             
            plan loans.  Petitioners do not dispute that the distribution of                             
            the $75,000, i.e., the principal of the plan loans, if it is                                 
            taxable to them at all, is taxable in 1988, pursuant to the                                  
            legislative history of section 72(p) as interpreted by                                       
            respondent.  Accordingly, we sustain respondent's determination                              
            that the Chapmans and the Christies each received a distribution                             
            from the Plan in the amount of $37,500 in 1988.10                                            
                  We are not convinced, however, that Congress intended that                             
            interest accruing during or after the 5-year period be treated as                            
            a taxable distribution for purposes of section 72(p)(1).                                     
            Respondent's argument relies upon the fiction that the accrued                               
            interest constitutes an additional loan.  From the language of                               
            section 72(p)(1), it is apparent that, to be a taxable                                       
            distribution, the loan amount must be received either directly or                            

                  9Respondent's argument assumes that Milo Chapman and David                             
            Christie were participants in the Plan and that the Plan loans                               
            otherwise satisfied the requirements of the exception in sec.                                
            72(p)(2)(A).  Petitioners do not challenge these assumptions.                                
                  10There seems to be a gulf between the language of the                                 
            statute and the legislative history.  In other circumstances, we                             
            might be concerned about this disparity, which indicates                                     
            legislation by conference report rather than by concise                                      
            statements in the statute.  Taxpayers should not be compelled to                             
            look at legislative history to determine the tax consequences of                             
            their activities.                                                                            

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