shareholder took out a loan in December 2007 for $50,000.
In November 2008 he took out another $25,000 loan.
Plan does not allow for inservice distributions.
The employer has been self-administering this plan.
Their CPA prepares the 5500.

The November 2008 loan is in excess of allowable amount and so is a prohibited transaction and a deemed distribution for 2008.
The shareholder is making payments on the $50,000 loan and is current on that.
He has not made sufficient payments on the second loan.
He will repay the second loan before the end of 2009, with interest, which will cure the prohibited transaction.

Under the Sec. 72 regs, is the second loan deemed again in 2009 because it was unpaid on January 1st?

Thanks.

No, only deemed once (otherwise you'd have double taxation, as being deemed makes the loan balance taxable to the individual). My understanding is that the payments should go into an after-tax source as that portion of the participant's balance has now been taxed.