Participant X died w/ $1,000 plan loan outstanding. X's account ($10,000 including the $1,000 loan) distributes equally to two beneficiaries. Should the 1099R to each bene be (A) for $5,000 or (B) for $4,500 w/ a third 1099 for $1,000 going to deceased taxpayer/estate?? Thanks

You are on the right track...

The 1099s to the benes should only be for the the part of the distribution that they receive ($4500 in your example). The loan should be taxed and 1099'd to the estate of the decedent using the estate's tax id number.

[This message has been edited by Fredman (edited 04-28-99).]

can you point me to the Code, Reg. or rulings that support your analysis of the taxation of an outstanding plan loan upon the death of the participant. I have done some research on the issue and have come up empty.

Kurt

At the same time as Fredman was kindly responding, I ran across the following article: “Plan Administration of Tax Treatment of Loans at a Participant’s Death” by Elinor Merl in the Winter 1996 issue of Journal of Pension Benefits. It cites Reg 1.401(a)-20 Q&A 26 as guidance. I recommend the article.

the Merlinor article is indeed very good. Just a heads up for anyone else that is interested, the authority is 1.401(a)-20 Q&A 24(d).

Thanks for pointing me to the article,

Kurt