-11-
The assignment of the accounts receivable, whether they were
encumbered or unencumbered,6 to satisfy the Corporation's funding
obligation under section 412 was a "sale or exchange". See
Commissioner v. Keystone Consol. Indus., Inc., supra; Zabolotny
v. Commissioner, 7 F.3d 774, 776-777 (8th Cir. 1993), affg. in
part and revg. in part on other ground 97 T.C. 385 (1991).
Therefore, we hold that the assignment of the accounts receivable
by the Corporation, a disqualified person, to the Plan was a
prohibited transaction under section 4975(c)(1)(A).7
Section 4975(a) imposes a 5-percent excise tax, which shall
be paid by any disqualified person who participates in a
prohibited transaction. Participation, under section 4975,
occurs any time a disqualified person is involved in a
transaction in a capacity other than as a fiduciary acting only
as such. Sec. 4975(a); O'Malley v. Commissioner, 96 T.C. 644,
6 The record does not reveal whether the accounts
receivable were encumbered. If they were encumbered, sec.
4975(f)(3) would be applicable: "A transfer of real or personal
property by a disqualified person to a plan shall be treated as a
sale or exchange if the property is subject to a mortgage or
similar lien which the plan assumes". Even if the accounts
receivable were not encumbered, the transfer constitutes a sale
or exchange because it was in satisfaction of a debt.
Commissioner v. Keystone Consol. Indus., Inc., 508 U.S. 152, 159
(1993).
7 This is consistent with Congress' goal in implementing
ERISA and sec. 4975. In enacting ERISA in 1974, "Congress' goal
was to bar categorically a transaction that was likely to injure
the pension plan." Commissioner v. Keystone Consol. Indus.,
Inc., supra at 160. In this case, the contribution of accounts
receivable presents concern over valuation and imposes collection
duties on the Plan.
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