Neil M. Baizer - Page 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            
               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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