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disqualified person [petitioner] were acting under the
highest fiduciary standards. [Sec. 4975(f)(5).]
Even assuming arguendo that we were to have found that the
1982 plan loan was modified within the meaning of the 1986 Act
effective date provisions, with the result that that loan may be
subjected to section 72(p)(3), on the instant record, we find
that section 72(p)(3) does not apply to that loan. Section
72(p)(3) applies to a loan that is not subject to section
72(p)(1) because it satisfies the exception in section 72(p)(2).7
7 Sec. 72(p)(1) provides that if during any taxable year a
participant or beneficiary receives any amount as a loan from a
qualified employer plan, that amount is to be treated as having
been received by such individual as a distribution under such
plan.
Sec. 72(p)(2) provides the following exception to sec.
72(p)(1):
(A) General Rule.--Paragraph (1) shall not apply to any
loan to the extent that such loan (when added to the out-
standing balance of all other loans from such plan whether
made on, before, or after August 13, 1982), does not exceed
the lesser of--
(i) $50,000, reduced by the excess (if any) of--
(I) the highest outstanding balance of loans
from the plan during the 1-year period ending on
the day before the date on which such loan was
made, over
(II) the outstanding balance of loans from
the plan on the date on which such loan was made,
or
(ii) the greater of (I) one-half of the present
value of the nonforfeitable accrued benefit of the
employee under the plan, or (II) $10,000.
(continued...)
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