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Therefore, the issue becomes whether the merged amount is the
equivalent of an employer contribution to a nonqualified plan.
The employer, the corporation, had already contributed the
assets to the frozen plan, plan 2, prior to 1983; it could not
contribute assets that it did not own. In Albertson's, Inc. v.
Commissioner, 95 T.C. 415, 426 (1990), affd. 42 F.3d 537 (9th
Cir. 1994), the Court stated:
Contributions to qualified plans are held and invested
by the trustee or insurance company until the time of
distribution to the employee. The assets contributed
to the trustee or insurance company cease to be assets
of the employer and are not subject to the debts,
obligations, and creditors of the employer. * * *
A review of the law applicable to plan mergers is necessary
to determine if a plan beneficiary should be taxed when pension
plans merge. The regulations define a merger of plans to mean a
"combining of two or more plans into a single plan." Sec.
1.414(l)-1(b)(2), Income Tax Regs. Although the regulations are
specific and detailed concerning the requirements of a plan
merger, there is no reference to beneficiaries' being taxable as
a consequence of a plan merger. The legislative history of
section 414(l) is also devoid of any suggestion that a merger
could constitute a taxable event for a beneficiary.
The case closest to point is William Bryen Co. v.
Commissioner, 89 T.C. 689 (1987). In that case, an unqualified
money purchase plan was merged into an otherwise qualified money
purchase plan, resulting in the disqualification of the surviving
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