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We agree with respondent’s application of section
72(p)(2)(C) to the facts of this case. Petitioner did not make
any payments from the time of the loan disbursement in June 2000
through the time that the loan was reported as a distribution by
the plan on December 29, 2000. Two calendar quarters had passed
since petitioner had obtained the loan, resulting in a violation
of the statutory imperative that the terms of the loan require
that payments be made “not less than quarterly”. Sec.
72(p)(2)(C). Furthermore, this was a period of approximately 6
months, or 10 percent of the original 5-year term of the loan.
3(...continued)
results in a deemed distribution at the time of such
failure. However, the plan administrator may allow a cure
period and section 72(p)(2)(C) will not be considered to
have been violated if the installment payment is made not
later than the end of the cure period, which period cannot
continue beyond the last day of the calendar quarter
following the calendar quarter in which the required
installment payment was due.
(b) Amount of deemed distribution. If * * * there is a
failure to pay the installment payments required under the
terms of the loan * * * then the amount of the deemed
distribution equals the entire outstanding balance of the
loan (including accrued interest) at the time of such
failure.
Sec. 1.72(p)-1, Q&A-10, Income Tax Regs. Before the issuance of
the final regulations, proposed regulations had been issued
which, for purposes of this case, had the same provisions as the
final regulations. The proposed regulations were to apply only
to loans made a certain period of time after final regulations
had been published. Sec. 1.72(p)-1, Q&A-19, Proposed Income Tax
Regs., 60 Fed. Reg. 66237 (Dec. 21, 1995). In this Court,
proposed regulations generally are afforded no more weight than
that of any other position advanced by the Commissioner at trial.
Gen. Dynamics Corp. & Subs. v. Commissioner, 108 T.C. 107, 120
(1997); Laglia v. Commissioner, 88 T.C. 894, 897 (1987).
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