Neil M. Baizer - Page 15

          section 53.4941(e)-1, Foundation Excise Tax Regs., may be relied            
          upon in interpreting terms appearing both in section 4941(e) and            
          section 4975(f).  Sec. 141.4975-13, Temporary Excise Tax Regs.,             
          41 Fed. Reg. 32890 (Aug. 6,  1976); see also Leib v.                        
          Commissioner, 88 T.C. 1474, 1482 (1987). The regulations under              
          section 4941, which relate to self-dealings involving private               
          foundations, are instructive in deciding whether a prohibited               
          transaction has been properly corrected.  Section                           
          53.4941(e)-1(c)(3), Foundation Excise Tax Regs., provides the               
          following:  "in the case of the sale of property to a private               
          foundation by a disqualified person for cash, undoing the                   
          transaction includes, but is not limited to, requiring rescission           
          of the sale where possible."  (Emphasis added.)                             
               The prohibited transaction was the assignment of the                   
          accounts receivable by the Corporation to the Plan.  With this              
          exchange, the Corporation's funding obligation was satisfied.               
          While this was not a straight cash sale of the accounts                     
          receivable to the Plan, the transaction is economically similar             
          when the following two steps are combined:  First, sale of                  
          accounts receivable for cash; second, the Corporation's                     
          contributing the cash to discharge its funding obligation.                  
               A rescission could occur if the Corporation replaced the               
          assigned accounts receivable with cash.  While this was feasible,           
          the Corporation has never replaced the accounts receivable                  
          contributed to the Plan with cash.                                          

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Last modified: May 25, 2011