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I think you are overthinking it. The fact this isn't cash doesn't change the classification in my mind. So put it on the line with any other rolled over assets if any. (And then move it to where the auditor says.)

Ideally prior year 5500 would have contained code 4R ("we ain't filing next year) but if it didn't you need to choose between filing current year with code 4R (my recommendation) or wait and see if you get a "where's your 5500" letter and then explain the situation. If it turns out you'll be back over 100 next year I'd just file for current year to keep the EFAST computers happy.

I agree with you on asset sale vs stock sale above. In OPs case where a majority owner (60%) simply buys out the minority owner to become 100% owner, I would not expect many changes at all, if any.

If it was 20 years ago, I don't think the loan could even be made. When did they change the rules to allow owners of S-Corps to even take loans?

My experiences advising those who administer troubled plans are like BG5150’s observation. A few years ago, submitting a .pdf in the slot for an independent qualified public accountant’s report got a helpful lag. In the past two years, the file-or-else letter comes noticeably quicker than before. Don’t expect the Labor department to excuse an audit with no more explanation than that the plan trust lacks money to pay the CPA firm’s fee. If your client is or includes a fiduciary who decided that the plan’s trust would pay or deliver final distributions without setting aside a reserve for plan-administration expenses, consider whether each fiduciary wants his, her, or its lawyer’s advice about whether so deciding breached the fiduciary’s responsibility, and whether the fiduciary might be liable to restore the plan’s assets as needed to meet the plan’s expenses. If you are a service provider that would draft a Form 5500 report on 2016, consider whether the plan paid your fees or what advance retainer you might require before you commit to a service.

but the potential return for the plaintiffs' attorneys..... isn't that what this is really about?

Or you can get 2,857% of that return by investing in the KGPF

What I can tell you is the note gets you past the computer edit checks. If you say the plan is large enough for a report to be attached and there is no pdf attached the computer rejects the filing. However, since a computer isn't smart enough to know the difference between a note and a report it simply accepts any pdf attached. We have filed with a note when the report wasn't ready on time and then filed an amended form when the report was ready. It so far has worked even if it is playing with fire.

The IRS has never said that 100% vesting is required.