Owner has deemed loan. Is this a prohibited transaction?

[Jim Chad]

Owner has deemed loan. Is this a prohibited transaction?

My understanding is that a deemed loan is not a qualifying exception to the prohibited transactions because it is not a qualifying loan.

I sthis still the view of the department of Labor?

Has anyone heard of them enforcing this? Do they ignore it because they think it is an unintended consequence of the rules?

[austin3515]

I have never heard of the PT rules coming up for a participant loan transaction. I suppose if it was egregious, perhaps. So if he/she took a $100K loan over 10 years, I suppose I would be more concerned then the owner not making the required payments on an otherwise qualified loan. The former example is more a "loan to a party in interest" than a true participant loan.