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Text of IRS TAM 201425019: ESOP Loan Operation Created Prohibited Transaction, Regardless of Compliance of Plan Document (PDF)
Internal Revenue Service [IRS] 
[Official Guidance] June 23, 2014
"Here the Loan, in the amount of required monthly principal payments of only which either would have required 15 years, not 10, to pay off in its entirety, or would have resulted in a balloon payment thus violating the special rule's level annual payment requirement. Consequently, even if the language in the Plan and pledge agreement met the documentary requirement ... the Loan violates the regulation in operation and fails to be exempt.... Section 54.4975-7(b)(8) of the Regulations imposes both an operational and a documentary requirement."
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