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$50,000 to each of them are distributions and, as such, are
income to the recipients. See sec. 72(p)(2)(A). Respondent
argues that there were no bona fide loans between the Plan and
petitioners, and that no part of the transfers qualifies as a
nontaxable loan under section 72(p)(2). In the alternative,
respondent argues that even if the transfers were loans, the
amounts received would still be deemed distributions under
section 72(p) and, as such, income to petitioners. As to all
issues, petitioners bear the burden of establishing that
respondent's determinations are incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933).
I. Distributions From the Plan and Bona Fide Debt
Section 402(a) provides that "any amount actually
distributed to any distributee by any employees' trust described
in section 401(a) * * * shall be taxable to the distributee, in
the taxable year of the distributee in which distributed, under
section 72".6 Section 72(p)(1)(A) generally provides that loans
from a qualified employer plan to plan participants or
beneficiaries are treated as taxable distributions. Section
72(p)(2) provides an exception, however, where the following
requirements are met: (1) The loan does not exceed the lesser of
the amount set forth in section 72(p)(2)(A)(i) or (ii); (2) the
6 The provision applies to distributions made after
Dec. 31, 1992. For our purposes, the version of sec. 402(a) in
effect for distributions made in 1992 was essentially the same.
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