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to petitioner, reporting the full amount of the loan as a taxable
distribution. The Form 1099-R was mailed to “8713 Airport
Freeway, North Star Plaza II, N. Richland Hills, TX 76118”;
petitioner’s operating division and suite number were again
omitted.
On petitioner’s Federal income tax return for taxable year
2000, petitioner did not report the $14,500 loan amount as
income. In the notice of deficiency, respondent determined that
the $14,500 was both includable in petitioner’s income as a
taxable distribution and subject to the section 72(t) additional
tax on early distributions from qualified retirement plans.
The first issue for decision is whether petitioner’s failure
to make payments on the loan from the qualified retirement plan
resulted in a taxable distribution from the plan.
Distributions from qualified plans generally are included in
the distributee’s income in the year of the distribution in
accordance with the provisions of section 72. Sec. 402(a). As a
general rule, a qualified plan participant who receives a loan
from a plan is treated as having received a distribution from the
plan in the year the loan is received. Sec. 72(p)(1)(A).
However, paragraph (2) of section 72(p) provides an exception for
certain loans which prevents the inclusion in income. A
limitation upon this exception is found in subparagraph (C) of
paragraph (2), which provides as follows:
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Last modified: May 25, 2011