What needs to be defined is If you took out a lump sum iin your name" - then taxes are indeed applicable. But if you did a direct rollver made payable to the 401(k) holder, you are okay.
i would suggest taking this matter to a tax accountant or even an attorney. If anyone can take care of this - they can. they have all necessary forms at their fingertips.

for now, see about the check and how that was rolled over to your 401(k) holder. Again, if in your name - the government uses as reportable income. i wish you luck.

The first step is to go to your benefits administrator. They will be able to tell you if the amount of the loan could or could not be rolled over to the new plan. The fact that they are still taking payments out of your account is what is questionable. Since you recieved a 1099-R the amount reported is not only taxable but you have a 10% penalty for early widthdrawl. This was reported to the IRS who will flag you for an audit if you don't get this corrected. The biggest problem is that you actually moved to a new plan or company for your 401k due to the sale of the company. Whenever you lose your job or make a change the loan amount that is not repaid is treated as a disbursement and is taxable. Most companies give you the option of making a one time lump sum payment to avoid the tax liabilities. It sounds like there are some possible errors on the part of your HR/Benefits department. Talk to them first and to try to get this straightened out. At least once you talk to them you will know what steps to take and how to do your tax return.