1099-R with Distribution code 1M

[ChiHoang]

I have a client with 1099-R distribution of $29K, and distribution code 1M.  He's under 591/2 years old.  Is this distribution taxable even though he told me it's a loan ? If it's not, how do I make it happen in ProSeries Basic ?

Thanks 

[dkh]

Looks like your client had a taken a loan out of his retirement account through his employer.  Client no longer works for that employer would be my understanding of why 1099-R code 1M is issued which makes the distribution (loan) taxable.

[ChiHoang]

He still works at the same place but his company was bought out by other company. He's been paying off every week about 1/2 of the loan so far. 

[dkh]

Were there payments after the company was bought out?

[ChiHoang]

Yes

[sjrcpa]

Something doesn't sound right. He should check with the Plan Administrator about the loan. If he made the scheduled payments there should not be a 1099-R for a loan default.

[ChiHoang]

OK. Thanks