Ramon A. Garcia and Bertha E. Garcia - Page 5

                                        - 5 -                                         

                                 Revised                                              
                       Year      Deficiency     Sec. 6662 Penalty                     
                       1990      $9,603         $1,921                                
                       1991      22,648         4,530                                 

                  Respondent computed the amount of the revised                       
             deficiency for 1990 by treating the principal amount of                  
             each of the loans that petitioner received in 1990 as a                  
             taxable distribution of plan assets in that year (viz                    
             $24,000, as shown in the following schedule).  In addition,              
             respondent treated the aggregate unpaid interest that                    
             accrued during 1990 on all of the outstanding loans,                     
             except the 1986 loans, as a distribution during 1990 (viz                
             $5,100.82, as shown in the following schedule).  This                    
             amount includes interest that accrued during 1990 on the                 
             loans made in 1987 and 1988 that the parties agree are                   
             deemed distributions prior to 1990.  Respondent calculated               
             the aggregate deemed distribution for 1990, $29,100.82, as               
             follows:                                                                 

                      Loan          Balance as ofBalance as of1990 AccruedTotal               
               Date Principal1990 Loans12/31/89  12/31/90 Interest Distribution          
              2/03/86$15,000.00                                                        
              5/01/8612,000.00                                                         
              8/15/8611,760.00                                                         
              1/15/8710,000.00       $13,120.87$14,482.98$1,362.11                     
              2/15/874,000.00        5,248.35  5,793.19  544.84                        
              2/15/8810,000.00       11,886.86 13,120.87 1,234.01                      










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