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plan to a plan participant or beneficiary is treated as a
taxable distribution to the participant or beneficiary in
the taxable year in which the loan is received. See
Patrick v. Commissioner, T.C. Memo. 1998-30; Prince v.
Commissioner, T.C. Memo. 1997-324; Estate of Gray v.
Commissioner, T.C. Memo. 1995-421; cf. Furlong v.
Commissioner, 36 F.3d 25, 26 (7th Cir. 1994), affg. T.C.
Memo. 1993-191. Section 72(p)(2), however, provides an
exception to this general rule. Under this exception, a
loan is not treated as a taxable distribution if: (1) The
principal amount of the loan (when added to the outstanding
balance of all other loans from the same plan) does not
exceed a specified limit; and (2) the terms of the loan
impose certain minimum repayment requirements. See sec.
72(p)(2).
Section 72(p) was added to the Code by the Tax Equity
& Fiscal Responsibility Act of 1982 (the 1982 Act), Pub. L.
97-248, sec. 236, 96 Stat. 324, 509. In its original form,
section 72(p) provided in pertinent part as follows:
(p) Loans Treated as Distributions.--For
purposes of this section--
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