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Petitioners' assertion that they used Milo Chapman and David
Christie as intermediaries to avoid the excise tax of section
4975 is untenable. Petitioners now are bound by the form of the
loans that they have chosen and may not in hindsight recast the
transaction in another form. Don E. Williams Co. v.
Commissioner, 429 U.S. 569 (1977); Commissioner v. National
Alfalfa Dehydrating & Milling Co., supra; Lomas Santa Fe, Inc. v.
Commissioner, 693 F.2d 71, 73 (9th Cir. 1982), affg. 74 T.C. 662
(1980).
Petitioners seek to circumvent the above outcome by relying
upon examples 3, 5, and 6 found in 29 C.F.R. sec. 2550.408b-
1(a)(4) (1989), which they contend support treating the plan
loans as prohibited transactions rather than as participant
loans. These examples provide in pertinent part:
Example (2): P is a plan covering all the employees of
E, the employer who established and maintained [the
plan] P. F is a fiduciary with respect to P and an
officer of E. The plan documents governing P give F
the authority to establish a participant loan program
in accordance with section 408(b)(1) of the [Employer
Retirement Income Security Act of 1974] Act. Pursuant
to an arrangement with E, F establishes such a program
but limits the use of loan funds to investments in a
limited partnership which is established and maintained
by E as general partner. Under these facts, the loan
program and any loans made pursuant to this program are
outside the scope of relief provided by section
408(b)(1) because the loan program is designed to
operate for the benefit of E. Under the circumstances
described, the diversion of plan assets for E's benefit
would also violate sections 403(c)(1) and 404(a) of the
Act.
Example (3): Assume the same facts as in Example 2,
above, except that F does not limit the use of loan
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