Can this person take a loan?

[LCARUSI]

A law firm (C Corp) is owned by a father (45%), son (30%), and unrelated third lawyer (25%). The wife of the father is an employee and participant in their 401(k) Plan and wants to take a loan from the 401(k) Plan.

I think she is a party in interest by virtue of her relationship to the father and son whose combined ownership exceeds 50% and therefore can not take a loan.

Am I analyzing this correctly?

[This message has been edited by LCARUSI (edited 10-07-98).]

[This message has been edited by LCARUSI (edited 10-07-98).]

[Lynn Campbell]

If the Plan permits loans, and this is a C-Corp. then she should be able to borrow, even though she is a party-in-interest, I think. If it were an S-Corp then no.

[Guest JB2]

I agree. I believe the loan restriction applies to owner-employees (sole prop, partnership, s-corp). All employees of a c-corp (regardless of stock ownership) are considered eligible for loans.