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Stephanie and David made unsuccessful attempts to sell the
Atascadero property at different times over the next 2 years.
Stephanie and David leased the property to tenants during some
portions of the period that they owned the property. David lived
on the Atascadero property during periods he and Stephanie could
not find tenants. In 1993, Stephanie and David ended their
relationship.
At some point during or before 1994, Stephanie sold her
townhouse in Hercules and built a home in Oakland, California, in
which she resided. While Stephanie lived in Oakland, her mother
experienced health problems and moved in with her.
In 1994, respondent examined petitioner’s profit-sharing
plan and trust. Respondent determined that the 1988 loans to
Stephanie and Johnathan and the Atascadero loan to Stephanie and
David were prohibited transactions under section 4975(c) because
they were made to disqualified persons as defined by section
4975(e)(2). Respondent required Stephanie and Johnathan to
correct the prohibited 1988 loans by returning the outstanding
loan balances to the plan by December 31, 1994, and that they
each pay a 5-percent excise tax and interest. Johnathan and
Stephanie repaid the outstanding balances of their 1988 loans by
December 31, 1994.
With respect to the Atascadero loan, respondent offered to
allow the transaction to be corrected in either of two ways.
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