- 6 -6
provided for quarterly repayments of the borrowed funds at 12-
percent interest, with the final installment due on July 5, 1994.
The note further provided:
It is agreed that in case of default in any payment of
interest, or termination of the employment of maker, or
the death of maker, the entire debt shall immediately
become due and payable at the option of the holder
hereof.
Petitioner never made any repayments of the borrowed funds to the
plan.
At the end of 1990, Jessie Homan, an account administrator for
Deposit Guaranty, contacted Jerard Pitts, the business manager at
Heidelberg & Woodliff, to discuss petitioner's delinquent payments
on his loan. Ms. Homan inquired whether the loan should be
declared in default and charged off. Mr. Pitts informed Ms. Homan
that petitioner was leaving the firm; they decided to charge off
the loan in January 1991 in accordance with the terms of the note.
On February 7, 1991, Deposit Guaranty issued a check for
$36,424.07 payable to petitioner. The check represented
petitioner's balance in the plan, $85,455.49, less the amount of
unrepaid funds borrowed from the plan, $49,031.42. The check was
mailed to Mr. Pitts and was negotiated by petitioner in 1991.
Petitioner failed to roll over any of the distributed funds into
another qualified tax-deferred account within 60 days.
A Form 1099-R (Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRA's, Insurance Contracts,
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