- 6 -
section 4975 during the years in issue even though the loan,
pursuant to section 72(p), was treated as a distribution in an
earlier year.
To resolve this issue, we need not look beyond the plain and
ordinary meaning of the words used in section 72(p). See United
States v. Locke, 471 U.S. 84, 93 (1985); Phillips Petroleum Co.
v. Commissioner, 101 T.C. 78, 97 (1993). Section 72(p)(1)(A)
provides that a loan from a qualified employer plan to a plan
participant "shall be treated as having been received by such
individual as a distribution under such plan." The loan is
"treated" as a distribution only for purposes of section 72,
which determines the amount of a distribution subject to income
tax. See sec. 72(p). The characterization of the loan for
section 72 purposes does not change its inherent character for
section 4975 excise tax purposes. Accordingly, section 4975 may
apply to a loan even though such loan, pursuant to section 72(p),
was treated as a distribution. Section 4975 is applicable to
petitioners' loan transaction.
II. Correction of the Prohibited Transaction
Petitioners contend, in the alternative, that they are not
liable for section 4975 excise taxes because they "corrected" the
prohibited transaction on August 15, 1991, the date Mr. Medina
executed the document that assigned to the plan the proceeds from
a future sale of Sunshine Villa Apartments. Respondent contends
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011