French E. Hickman and Janice C. Hickman - Page 22

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          In general, a loan fits within the exception in section 72(p)(2)            
          if it (1) is in an amount not exceeding a prescribed ceiling that           
          in no event may be more than $50,000, (2) is required by its                
          terms to be repaid within five years, and (3) requires substan-             
          tially level amortization, with payments made at least quarterly.           


          7(...continued)                                                             
               For purposes of clause (ii), the present value of the                  
               nonforfeitable accrued benefit shall be determined                     
               without regard to any accumulated deductible employee                  
               contributions (as defined in subsection (o)(5))(B)).                   
               (B) Requirement That Loan Be Repayable Within 5 Years.--               
                    (i) In General.--Subparagraph (A) shall not apply                 
                 to any loan unless such loan, by its terms, is re-                   
                 quired to be repaid within 5 years.                                  
                    (ii) Exception for Home Loans.--Clause (i) shall                  
                 not apply to any loan used to acquire any dwelling                   
                 unit which within a reasonable time is to be used                    
                 (determined at the time the loan is made) as the prin-               
                 cipal residence of the participant.                                  
               (C) Requirement of Level Amortization.--Except as pro-                 
            vided in regulations, this paragraph shall not apply to any               
            loan unless substantially level amortization of such loan                 
            (with payments not less frequently than quarterly) is                     
            required over the term of the loan.                                       
                        *     *     *     *     *     *     *                         
          The Tax Equity & Fiscal Responsibility Act of 1982 (TEFRA),                 
          Pub. L. 97-248, sec. 236(a), 96 Stat. 509-510, amended the Code             
          to add sec. 72(p)(1) and (2), effective for loans, assignments,             
          and pledges made after Aug. 13, 1982, TEFRA, sec. 236(c), 96                
          Stat. 510-511 (TEFRA effective date provisions).  In applying the           
          TEFRA effective date provisions governing sec. 72(p)(1) and (2),            
          the outstanding balance of any loan which is renegotiated,                  
          extended, renewed, or revised after Aug. 13, 1982, is to be                 
          treated as an amount received as a loan on the date of such                 
          renegotiation, extension, renewal, or revision.  TEFRA, sec.                
          236(c), 96 Stat. 510-511.                                                   




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