401(k) loan and quit or lost job

[Robert Hetrick]

Hi BP,

Quick question for ya'll.  I'm considering a 401(k) loan to buy some investment property.  My question has to do with how the tax and penalty is calculated should I quit or lose my job - I have no expectation that this will happen, I just want to make sure I understand the ramifications before I pull the trigger.

My question is this:

Say I take a 5 year loan.  Then assume I quit/lose job after 3 years.  Is the tax and penalty that will be due based on the ORIGINAL amount of the loan, or only the OUTSTANDING balance of the loan at the time I leave?

Thanks in advance!

Rob