I have a client who is asking whether the "substantially equal" repayment requirement, means exactly equal and to what extent the Regs. allow these payments to not be the same. Is anyone aware of how this has been interpreted in the past?

I've always interpreted it to mean level amortization. The only variance would be if the payment schedule changed from quarterly to monthly, but in such an event, the payments would still be "substantially" equal.

Hope this is of some help.