Douglas R. and Jane E. Prince - Page 15

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          the present value of one-half of petitioner's "accrued benefit"             
          under the pension plan exceeded $100,000.                                   
               Section 402(a) provides that, with exceptions not here                 
          relevant, distributions from a qualified plan are taxable to the            
          distributee, in the taxable year of the distributee in which                
          distribution occurs, pursuant to section 72.  Section 72(p)(1)(A)           
          provides the general rule that loans from a qualified employer              
          plan to plan participants or beneficiaries are treated as taxable           
          distributions.  Section 72(p)(2)(A), however, provides an                   
          exception to the general rule for any loan to the extent that               
          such loan (when added to the outstanding balance of all other               
          loans from the plan) does not exceed the lesser of:  (1) $50,000            
          (reduced under conditions not here relevant), or (2) the greater            
          of one-half of the present value of participant's "nonforfeitable           
          accrued benefit" under the plan or $10,000.9  The exception                 
          provided in section 72(p)(2)(A) does not apply unless:  (1) The             
          loan, by its terms, is required to be repaid within 5 years, sec.           
          72(p)(2)(B), and (2) "substantially level amortization of such              

          9    The parties stipulated that, at all relevant times, one-half           
          of the present value of petitioner's "accrued benefit" exceeded             
          $100,000.  We, however, conclude that the stipulation is not                
          helpful as sec. 72(p)(2)(A)(2) takes into account only the                  
          participant's nonforfeitable accrued benefit.  We note that, in             
          any case, the sec. 72(p)(2)(A) exception is limited to loans                
          (when added to the outstanding balance of all other loans from              
          the plan) that do not exceed $50,000.  The lesser of (1) $50,000            
          or (2) the greater of the two specified amounts, sec.                       
          72(p)(2)(A), is an amount equal to $50,000 or less.  Accordingly,           
          loans that exceed $50,000 do not qualify for the sec. 72(p)(2)(A)           
          exception.                                                                  




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