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a participant extends a non-home loan having a five
year or less repayment term beyond five years, the
balance of the loan at the time of the extension is a
taxable distribution to the participant.
During November of 1994, petitioner sought to borrow against
his accrued benefit under the plan. Pursuant to Edberg’s
recommendation, petitioner authorized the loan transaction on
behalf of the corporation’s board of directors as well as the
shareholders. The minutes of the board and shareholders meeting,
held on November 16, 1994, provide as follows:
The meeting was held because the Pension Plan
Administrators (Edberg’s people) indicate that there
must be corporate approval in order for Clayton W.
Plotkin to borrow from the Pension Plan. According to
Annie at Edberg’s office, Plotkin is able to borrow up
to $50,000 but he only wants to borrow $25,000. The
loan must be secured, must be payable at least
quarterly of principal and interest, it can be
amortized over any length but it must be paid off at
five years with a balloon payment balance, and interest
should be prime plus one or two percent. If there have
been no other loans or changes Plotkin can borrow again
at the end of the five years in the amount needed to
pay off the balance of the loan.
* * * * * * *
RESOLVED that Clayton W. Plotkin, be allowed to
borrow $25,000 from the Pension and that there be
a note with a deed of trust secured to Plotkin’s
house * * *. The interest rate on the loan is to
be 9% with monthly payments of principal and
interest of $253.57. Payments are to be due the
1st day of the month and will be late if not
received by the 15th day of the month. Payments
start 01/01/95. The loan payments will be based
on a 15 year payment with a balloon payment due
when the loan is supposed to be paid off. If he
is able Plotkin may borrow from the Pension Plan
to pay off the balance due but must meet the
requirements at that time. We will get a schedule
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