- 6 - level amortization with quarterly or more frequent payments required over the term of the loan. Sec. 72(p)(2)(A) to (C). A loan from a qualified employer plan no longer satisfies the requirement of section 72(p)(2)(C) when the participant fails to make a loan payment either on the date that it is due or within the allowed grace period. See, e.g., Molina v. Commissioner, T.C. Memo. 2004-258; see also Estate of Gray v. Commissioner, T.C. Memo. 1995-421. Petitioner argues that the amount of the USAA SIP account applied to her outstanding loan balance should be deemed a distribution in 2000, the year that the loan was made, as opposed to 2001. Petitioner’s loan satisfied the requirements of section 72(p)(2) at the time that it was made and throughout 2000. Thus, the loan was not treated as a distribution in 2000. When petitioner failed to repay the loan in 2001 under the terms of the loan agreement, the application of her USAA SIP account balance to the loan discharged her debt and became a taxable distribution to her in 2001. Section 72(t) provides for a 10-percent additional tax on early distributions from a qualified retirement plan for the taxable year in which the distribution is received. The 10-percent additional tax, however, does not apply to certain distributions. Section 72(t)(2) sets forth specific exemptions. Section 72(t)(2)(B) provides that the additional tax shall notPage: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011