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plan loan, the accrued benefit of the participant or
beneficiary is reduced (offset) in order to repay the
loan (including the enforcement of the plan’s security
interest in the accrued benefit). A distribution of a
plan loan offset amount could occur in a variety of
circumstances, such as where the terms governing the
plan loan require that, in the event of the partici-
pant’s request for a distribution, a loan be repaid
immediately or treated as in default.
(b) Plan loan offset. In the event of a plan loan
offset, the amount of the account balance that is
offset against the loan is an actual distribution for
purposes of the Internal Revenue Code, not a deemed
distribution under section 72(p). * * *
Id.
On the record before us, we find that petitioner has failed
to carry his burden of showing that he is not required to include
$25,940.49 in his gross income for his taxable year 2002.
Claimed Earned Income Tax Credit
In petitioner’s 2002 return, petitioner claimed the earned
income tax credit. Section 32(a)(1) permits an eligible individ-
ual an earned income tax credit against such individual’s tax
liability. The earned income tax credit is calculated as a
percentage of the individual’s earned income. Sec. 32(a)(1).
Section 32(a)(2) limits the credit allowed. Section 32(b)
8(...continued)
terms governing the plan loan, the loan is cancelled,
accelerated, or treated as if it were in default (e.g.,
where the plan treats a loan as in default upon an
employee’s termination of employment or within a speci-
fied period thereafter). A distribution of a plan loan
offset amount is an actual distribution, not a deemed
distribution under section 72(p).
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