How does a prohibited transaction loan get corrected if the participan

[John A]

A prohibited transaction occurred when a loan was given to a partner who had an interest of more than 10% in the capital or profits interest of the partnership. If the partner is unable to repay the loan, how can this be corrected? Any creative ideas out there?

[Bill Berke]

If the plan is not a 401k) plan, then you can deem the loan a distribution. The complete rules are found in the IRS reg's and pronouncements. If the plan is a 401(k) plan, the process has some twists, but these rules are also found in the reg's.