Michael Morrissey - Page 1

                                 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,                 
                    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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