- 12 -
plan. The Court referred to the merger as a "pooling" of the two
plans. Id. at 693. The Court did not hold, or even mention, if
the merged amount constituted a contribution.
In our case, if the merged amount were a contribution by the
corporation, then plan 1 would have been grossly overfunded for
1986. The parties have stipulated that the plans were in
operational compliance; i.e., not overfunded.
As respondent acknowledges, the merger, or pooling, of an
exempt trust into a nonexempt trust is not a contribution.
Therefore, a plan merger is not a contribution that creates
income for the beneficiaries of a surviving trust. Mr. Fazi did
not receive a net increase in his account balances; his account
balance in plan 1 increased by the same amount that his account
balance in plan 2 decreased. Contrary to respondent's claims,
the Court in Fazi I merely accepted respondent's incorrect
concession that the merged amount was not taxable in 1987; we did
not hold that the merged amount was a contribution to the
surviving plan.7
7 In Fazi I, 102 T.C. at 703 n.7, we stated: "Further, respondent points out
that the merging of plan 2 into plan 1 during 1986 would be taxable in 1986,
rather than in 1987 as determined in the notice of deficiency." (Emphasis
added.) We further stated:
respondent has conceded that the taxable distribution for 1987
should not include those contributions made during 1985 or 1986
because they would be taxable to petitioners in the years
contributions were made to an unqualified trust and not at the
time of distribution. Additionally, because the amount in plan 2
was merged into plan 1 during May 1986, a year in which the plans
and the trusts were unqualified, that amount would likewise be
taxable in 1986, rather than 1987. [Id. at 713; emphasis added.]
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011