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issue was her desire to discover new facts with which to
resuscitate her meritless litigation position. The following
statements from respondent's memorandum are illuminating in this
regard:
due to the complexity of the prohibited transaction
rules and the many ways in which disqualified person
status can be achieved through specific relationships
described in I.R.C. � 4975(e)(2), it was imperative
that respondent explore other possible violations
before conceding that the facts (as represented by
petitioner's counsel) demonstrated no violation.
* * * * * * *
Petitioner husband established the IRA and created
a DISC inside of his IRA to shelter from current income
inclusion dividend payments made by an international
trading company in which he was the sole shareholder.
But for the existence of the IRA, such dividends would
be currently taxable to him. If he had created the
DISC outside of the IRA, and then sold some or all of
the stock in the DISC to the IRA, the sale of stock in
the DISC to his IRA would clearly violate the
prohibited transactions rules under I.R.C. � 4975.
Similarly, the payment of any dividends from his wholly
owned corporation to his IRA that effectively allows
him to avoid current income inclusion because he
assigned his interest in the DISC to his IRA arguably
represents an indirect benefit to him personally.
For example, both petitioner husband and
petitioner wife indirectly received a significant
current tax benefit derived from the payment of DISC
dividends into his IRA, rather than to the husband as a
direct shareholder. But for the creation and
maintenance of the IRA, petitioner husband (and, by
virtue of her election to file a joint return, the
petitioner wife) would have current income inclusion
for payments from the trading corporation to the DISC.
Accordingly, the transactions between his wholly-owned
trading corporation to such entity are arguably
indirect prohibited transactions between disqualified
persons and the IRA. Also, since one slight variation
in the structure or operation of the petitioner's
transactions could have resulted in noncompliance with
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