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These stringent requirements derive from the concern by
Congress with regard to the trustee's ability to manage and invest
retirement funds and the trustee's accountability for its actions.
H. Rept. 93-779, at 132 (1974), 1974-3 C.B. 244, 375. One of
Congress' apparent concerns with respect to the trustee's
accountability was the continuity of the trustee beyond the death
or change of the trustee's owner. The applicable House report
stated: "It is anticipated that the Secretary probably will not
allow individuals to act as trustees for individual retirement
accounts." Id. Consequently, section 1.401-12(n)(3)(i), Income
Tax Regs., provides:
The applicant must assure the uninterrupted performance
of its fiduciary duties notwithstanding the death or
change of its owners. Thus, for example, there must be
sufficient diversity in the ownership of the applicant to
ensure that the death or change of its owners will not
interrupt the conduct of its business. Therefore, the
applicant cannot be an individual.
Mr. Thomson operated his business affairs as a sole proprietor
through FAC. As an individual, he was not eligible to serve as a
trustee for an IRA trust.
Nonetheless, Mr. Thomson testified that he submitted a written
application to the IRS in May 1986 and received approval by letter
7(...continued)
Income Tax Regs., effective Dec. 20, 1995. T.D. 8635, 1996-1
C.B. 52.
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