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ASPPA DC-2 Chapter 10 Key Terms
ASPPA DC-2 Chapter 10 Key Terms
12
Finance
Professional
08/07/2009

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Term
Cure period
Definition
A cure period is a period of time during which theparticipant may make up any missed loan payments to avoid suffering the tax consequences of a deemed distribution. IRC 72(p) sets limits on the length of the cure period.
Term
Deemed distribution
Definition
"If a loan becomes taxable at the time when the participant is not permitted to take a distribution, the effect is a deemed distribution. A deemed distribution is a taxable event - that is, the taxation of a loan to the participant - but not a real distribution. "
Term
Defaulted loan
Definition
"When a participant defaults on his or her loan repayment (i.e., defaulted loan), a deemed distributino of the entire unpaid loan balance results because the repayment requirements of IRC 72(p) are no longer being satisfied. "
Term
Home loan
Definition
"A loan that is used to acquire a dwelling which, within a reasonable time, will be used as the participant's principal residence. "
Term
Loan offset
Definition
"Under IRC 72, payments of funds to a participant are presumably taxable. IRC 72(p) outlines the rules to ensure that a loan is not taxed to the participant. If these rules are violated, the loan will be taxable to the participants. If this occures when the participant is eligible to takea distribution, a loan offset will occure - that is, the loan will be considered to be a real distribution and will be removed permanently from the participant's account. "
Term
Qualified individual
Definition
"Individuals that qualify for increaed loan limits based on being effected by hurricanes Katrina, Rita and Wilma. "
Term
Refinancing
Definition
Refinancing transaction are transactions in whiich an existing loand is replaced ( or two or more existing loand are replaced) by a new loan.
Term
Repaid loan amount
Definition
"The repaid loan amount is the highest loan balane in the prior 12-month period, reduced by any outstanding loan balance at the time of the new loan. The general effect of the rule is to limit the total principal amount lent during any 12-month period to $50,000."
Term
Repyament period
Definition
"To be nontaxable, the repayment period for a perticpant loan, by its terms, must be not more than five years ( or 60 months), unless it is a princiapl residence loan."
Term
Replaced loan
Definition
When refinancing a loan the old loan is the replaced loan.
Term
Relacement loan
Definition
When refinancing a loan the new loan is the replacement loan.
Term
Step repayment
Definition
A way of structuring the amortization schedule t avoid deemed distribution under a longer-term replacement loan.
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