- 19 -
making comparable loans, Z's subsequent use of the loan
proceeds will not affect the determination of whether
loans under P's program satisfy the conditions of
section 408(b)(1). [Emphasis added.]
Petitioners misconstrue the scope of 29 C.F.R. sec.
2550.408b-1. Section 406(a)(1)(B) of the Employee Retirement
Income Security Act of 1974 (ERISA), Pub. L. 93-406, 88 Stat.
879, generally prohibits loans between a plan and a party-in-
interest. Section 408(b)(1) of ERISA exempts loans to
participants and beneficiaries if the loans meet certain
requirements. The ERISA sec. 408(b)(1) exemption of ERISA
parallels section 4975(d)(1). 29 C.F.R. sec. 2550.408b-1(v).
The regulation merely explains the circumstances in which these
exemptions are available for purposes of ERISA sec. 408(b)(1) and
section 4975(d)(1).8
The examples in 29 C.F.R. sec. 2550.408b-1 are merely
illustrative of those circumstances; they do not purport to limit
the situations in which section 72 may apply or to describe the
income tax consequences of loans from a qualified profit-sharing
plan.
We are satisfied that this is not a case in which
petitioners are entitled to avoid the tax consequences arising
8ERISA and the Code provide an exemption from the prohibited
transaction rules where loans are available to all participants
on a reasonably equivalent basis, are not available to highly
compensated employees in greater amounts, bear a reasonable rate
of interest, and are adequately secured. See 29 C.F.R. sec.
2550.408b-1 (1989).
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011