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shareholders does not fit within the definition of a disqualified
person under section 4975(e)(2)(G).14 It was only after
Worldwide issued its stock to IRA #1 that petitioner held a
beneficial interest in Worldwide's stock, thereby causing
Worldwide to become a disqualified person under section
4975(e)(2)(G).15 Accordingly, the issuance of stock to IRA #1
14
Furthermore, we find that at the time of the stock issuance,
Worldwide was not, within the meaning of sec. 4975(e)(2)(C), an
"employer", any of whose employees were beneficiaries of IRA #1.
Although sec. 4975 does not define the term "employer", we find
guidance in sec. 3(5) of the Employee Retirement Income Security
Act of 1974 (ERISA), Pub. L. 93-406, 88 Stat. 829, 834. In
pertinent part, ERISA sec. 3(5) provides that, for plans such as
an IRA, an "'employer' means any person acting directly as an
employer, or indirectly in the interest of an employer, in
relation to an employee benefit plan * * *." Because Worldwide
did not maintain, sponsor, or directly contribute to IRA #1, we
find that Worldwide was not acting as an "employer" in relation
to an employee plan, and was not, therefore, a disqualified
person under sec. 4975(e)(2)(C). As there is no evidence that
Worldwide was an "employee organization", any of whose members
were participants in IRA #1, we also find that Worldwide was not
a disqualified person under sec. 4975(e)(2)(D).
15
Sec. 4975(e)(4) incorporates the constructive ownership rule
of sec. 267(c)(1), which states that:
Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be
considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries * * *
Petitioner, as the sole individual for whose benefit IRA #1
was established, was therefore beneficial owner of all the
outstanding shares of Worldwide after they were issued. Because
petitioner, as the sole beneficial shareholder of Worldwide, was
also a "fiduciary" with respect to IRA #1, Worldwide thus met the
definition of a disqualified person under sec. 4975(e)(2)(G).
Contrary to respondent's representations, petitioner was not
a "disqualified person" as president and director of Worldwide
until after the stock was issued to IRA #1. Sec. 4975(e)(2)(H).
Furthermore, petitioner was not a disqualified person under sec.
(continued...)
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