What year is loan taxable?

[Jim Chad]

Loan taken out in July of 2015. No payments were ever made.

Is it deemed and taxable 12-31-15 or 1-1-16?

[Kevin C]

12/31/2015 per 1.72(p)-1, Q&A 10.

Or, not at all if they do a VCP filing to correct it and request that the loan not be taxable.

[Mike Preston]

If the loan had quarterly payments with the first one due 10/1/2015, then the "cure period" extends until 3/31/2016. Hence there would be no deemed distribution if the 10/1/2015 payment is cured by 3/31/2016. I would strongly suggest that it best to bring the entire loan up to date, but it may not be feasible to do so.

[BG5150]

Doesn't it come down tot he loan agreement? Can't you have a cure period that is less than the statutory max?

[Mike Preston]

Good point. The loan procedures might be less liberal than the regulatory (not statutory) framework.