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satisfy the requirement that the loan must be
received to be a distribution. Accordingly, we
find that for the purposes of section 72(p)(1)
neither * * * [of the taxpayers] received
distributions in 1988 or 1989 equal to the
interest * * * which accrued on the plan loans.
[Chapman v. Commissioner, supra.]
Furthermore, we note that in proposed regulations
recently issued under section 72(p), the Department of
Treasury takes the position, contrary to respondent's
position in this case, that interest which accrues after
a loan is deemed distributed under section 72(p) is not
treated as an additional deemed distribution. Section
1.72(p)-1, Q&A-19, Proposed Income Tax Regs., 63 Fed.
Reg. 42, 44 (Jan. 2, 1998), states in part as follows:
[A-19] deemed distribution of a loan is treated
as a distribution for purposes of section 72.
Therefore, a loan that is deemed to be
distributed under section 72(p) ceases to be
an outstanding loan for purposes of section
72, and the interest that accrues thereafter
under the plan on the amount deemed distributed
is disregarded in applying section 72 to the
participant or beneficiary. Even though
interest continues to accrue on the outstanding
loan * * *, this additional interest is not
treated as an additional loan (and, thus, does
not result in an additional deemed distribution)
for purposes of section 72(p). * * *
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