ESOP DISTRIBUTION 1099-R OR 1099-INT?

[Guest LAURIE IBARRA]

Employee terminated in ESOP and sold stock back to corporation electing put-option with 5 year note. A 1099-R was prepared reporting distribution under the ESOP. The corporation issued separate 1099-INT for interest paid on note in 1999. Was this correct? Employee contacted IRS and was told interest on note should be reported on 1099-R? I haven't found this issue specifically addressed here and would appreciate any guidance.

[RLL]

I think IRS is wrong. If the corporation is paying the interest, Form 1099-INT should be used inasmuch as the interest is not a benefit distribution from the ESOP (but is a payment of interest on the corporation's note).