Sub-S Corp & loan

[alexa]

I have a Sub-s corp that took a pre-EGTRAA loan

Prior to EGTRAA this was a prohibited transaction

My question is if this loan were never paid back would this disqualify plan?

[Mike Preston]

My understanding, which could be wrong, so I'd like somebody else to confirm, is that the law, coupled with a judicious plan amendment authorizing loans, will cure the disqualifying defect and the PT. However, the PT for the period before the amendment is effective is subject to excise taxes. The question is whether the period before the amendment is effective is still subject to disqualification. I seem to recall somebody from the IRS saying that they wouldn't go after a plan in this position, even if they felt they could. That doesn't give me much comfort.

The way to be sure is to submit an application under EPCRS and see if they turn you down because you are not in need, as far as they are concerned. A John Doe application on this basis should be a good bet.