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loan (with payments not less frequently than quarterly) is
required over the term of the loan", sec. 72(p)(2)(C). The
requirement of section 72(p)(2)(C) applies to loans made,
renewed, renegotiated, modified, or extended after December 31,
1986. Tax Reform Act of 1986, Pub. L. 99-514, sec. 1134(b), 100
Stat. 2085, 2484.
Respondent, citing petitioners' concession that the renewed
loan does not provide for "level amortization", argues that the
renewed loan does not qualify for the section 72(p)(2)(A)
exception because it does not meet the section 72(p)(2)(C)
requirement of "level amortization". Consequently, respondent
contends that the renewed loan is a taxable distribution to
petitioners pursuant to section 72(p)(1)(A). Petitioners,
however, merely argue that "There is not enough in the record to
cause the $50,000 loan to constitute taxable income to the
petitioners under Section 72(p)."
Contrary to respondent's argument, section 72(p)(2)(C)
provides that the exception pursuant to section 72(p)(2)(A) does
not apply unless the loan requires substantially level
amortization. The phrase "substantially level amortization" is
less stringent than the phrase "level amortization". Although
petitioners conceded that the renewed loan did not provide for
"level amortization", respondent must still establish that the
renewed loan did not have "substantially level amortization" in
order to prevent the application of the exception contained in
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