T.C. Memo. 1998-443
UNITED STATES TAX COURT
MICHAEL MORRISSEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13074-97. Filed December 16, 1998.
P borrowed money from the pension plans of his
wholly owned corporation. On Oct. 19, 1990, when P
owed the plans principal and interest totaling
$1,150,000, he "repaid" this debt by transferring to
one of the plans his 50-percent interest in two parcels
of unencumbered real estate. The market value of one
parcel was $628,000 on Sept. 23, 1991. The market
value of the other parcel was $1.45 million on Nov. 9,
1991.
Held: P's transfer of property to his plan was a
"sale or exchange" under sec. 4975(c)(1)(A), I.R.C.;
hence, it was a prohibited transaction under sec.
4975(a), I.R.C., that subjects P to the initial tax set
forth in sec. 4975(a), I.R.C.
Held, further, The prohibited transaction was
never "corrected" within the meaning of sec. 4975(b),
I.R.C.; hence, P also is liable for the additional tax
set forth in sec. 4975(b), I.R.C.
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