§ 1.72(p)-1 Loans treated as distributions
The questions and answers in this section provide guidance under section 72(p) pertaining to loans from qualified employer plans (including government plans and tax-sheltered annuities and employer plans that were formerly qualified). The examples included in the questions and answers in this section are based on the assumption that a bona fide loan is made to a participant from a qualified defined contribution plan pursuant to an enforceable agreement (in accordance with paragraph (b) of Q&A-3 of this section), with adequate security and with an interest rate and repayment terms that are commercially reasonable.
IRS可以有两个点challenge: 是否是bona fide loan，而不是way of 401k excess contribution，以及interest rate是否是commerially reasonable.
(C) Distributions of excess deferrals and contributions and earnings thereon
The term “qualified distribution” shall not include any distribution of any excess deferral under section 402(g)(2) or any excess contribution under section 401(k)(8), and any income on the excess deferral or contribution.
excess deferral 对应的earning处理在Sec. 402 (A)(3)
(3) Treatment of distributions of certain excess deferrals
Notwithstanding section 72, if any excess deferral under section 402(g)(2) attributable to a designated Roth contribution is not distributed on or before the 1st April 15 following the close of the taxable year in which such excess deferral is made, the amount of such excess deferral shall—
(A) not be treated as investment in the contract, and
(B) be included in gross income for the taxable year in which such excess is distributed.
Exceptions for 401(k) and 403(b) plan loans
The law says that interest paid on a loan secured by your account balance is nondeductible if any of the account balance used to secure the loan is attributable to elective deferrals that you made. … So it’s easy to see that this exception virtually prohibits an interest deduction for interest that you pay on loans against your 401(k) or 403(b) plan. It’s possible that the vested balance in your account is totally from non-elective employer contributions, but extremely unlikely. So generally, interest that you pay on your 401(k) or 403(b) loan is nondeductible – regardless of how the loan funds were originally used.
(3) Denial of interest deductions in certain cases
(A) In general No deduction otherwise allowable under this chapter shall be allowed under this chapter for any interest paid or accrued on any loan to which paragraph (1) does not apply by reason of paragraph (2) during the period described in subparagraph (B).
(B) Period to which subparagraph (A) applies
For purposes of subparagraph (A), the period described in this subparagraph is the period—
(i) on or after the 1st day on which the individual to whom the loan is made is a key employee (as defined in section 416(i)), or
(ii) such loan is secured by amounts attributable to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3).