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dispute that, at the time petitioners received their lump-sum
distributions from the Plan, the Plan was not qualified under
section 401(a).
Petitioners assert, however, that the distributions they
received from the Plan should not be taxable because respondent
failed to give notice to the Plan sponsor of the possibility of
using the CAP Program in order to avoid plan disqualification.
Petitioners argue that this notice is mandatory under the CAP
Program, which was in place at the time Ace received its final
determination letter revoking the Plan’s qualified status.
Petitioners’ argument is without merit.
The IRS will, at the request of the taxpayer, issue an
initial determination letter stating whether a plan qualifies
under section 401(a). The Commissioner has broad authority,
however, to revoke a determination letter retroactively. Sec.
7805(b). As stated above, a plan, in order to be qualified, must
initially meet the formal requirements of section 401(a) and must
be continually amended to comport with subsequent changes to the
statutory requirements. Buzzetta Constr. Corp. v. Commissioner,
92 T.C. 641, 646 (1989). It is clear from the record, and there
is no dispute between the parties, that Ace failed to meet these
requirements, and it was for this reason that the Plan’s tax-
exempt status was revoked.
While it appears that respondent did not handle the instant
case in accordance with the guidelines set forth under the CAP
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Last modified: May 25, 2011