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Gideon Medina was an employee, the sole shareholder, and
president of Gideon L. Medina, M.D., P.C., a Michigan
professional corporation (corporation). Corazon Medina was
secretary of the corporation. The corporation established a
qualified employees' pension plan and trust (plan), which met the
requirements of section 401. During the years in issue,
petitioners were participants in the plan.
On December 1, 1986, petitioners borrowed $340,000 (loan)
from the plan to acquire Sunshine Villa Apartments. Petitioners
executed a promissory note with the following terms: (1)
Interest at the rate of 10.5 percent per annum is payable
annually; (2) any unpaid interest is added to the principal
amount; and (3) the entire principal amount is due 8 years from
the date of the note or, if sooner, upon the sale of Sunshine
Villa Apartments. On August 15, 1991, Mr. Medina executed a
document providing that "Building C of Sunshine Villa Apartments
* * * [is] assigned to * * * [the plan]. * * * to ensure that
the loan is paid if and when the Sunshine Villa is sold."
Petitioners did not file Form 5330, Return of Excise Taxes
Related to Employee Benefit Plans, for any of the years in issue,
nor did they make any payments to the plan pursuant to the terms
of the promissory note.
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Last modified: May 25, 2011