James B. and Joan E. Murtaugh - Page 11

                                       - 11 -                                         
          Therefore, he in effect repaid the loan out of his pension plan             
          account.                                                                    
               If the loan proceeds were taxed when first received by                 
          petitioner, taxing them at the time of the gross distribution               
          would lead to double taxation of the same funds, a result                   
          generally to be avoided.  See Campbell v. Commissioner, 108 T.C.            
          54, 67-68 (1997).  However, petitioners are required to show that           
          the loan proceeds were taxed when first received in order to                
          avoid taxation at the time they were offset against the gross               
          distribution, and they have not done so.  Petitioners make no               
          allegation or argument that the loan proceeds were taxed when               
          first received, and the available evidence suggests otherwise.              
          First of all, petitioner received a statement from the plan with            
          respect to the gross distribution that indicated that the                   
          $9,109.93 loan proceeds would be included in the gross                      
          distribution for purposes of taxable income.  Thus, the plan                
          administrators believed, and so advised petitioner, that the loan           
          proceeds were includable in income.                                         
               Moreover, it appears that the loan to petitioner was not               
          income when received because it was a loan of $10,000 or less.              
          In general a loan from a qualified plan to a plan participant is            
          treated as a distribution from the plan under section 72(p)(1),             
          and therefore included in income under section 72.  See sec.                
          402(a).  However, section 72(p)(2)(A) provides an exception to              
          the general rule for certain loans, and petitioner's loan appears           




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011