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the foregoing, we conclude that, in extending the Loan to Estes
Co., the plan violated the prudent investor rule.
Nevertheless, an isolated violation of the prudent investor
rule, although a factor to be considered, does not, of itself,
require a finding that the plan was not operated for the
exclusive benefit of the employees or their beneficiaries. We
must look at the entire picture in assessing whether the plan
violated the exclusive benefit rule. See Feroleto Steel Co. v.
Commissioner, 69 T.C. at 107. Mr. Shedd made an error in
judgment in having the plan lend money to Estes Co. without
security. We are persuaded, however, that Mr. Shedd intended the
plan, and thereby the participants, to benefit from the loan.
Indeed, on the basis of the record, we believe that the plan
would have profited from the loan if the depression in the real
estate market had not occurred in Arizona during the late 1980's.
The loan proceeds did not flow back to petitioner, nor were they
diverted for the personal benefit of the Shedds or Mr. Estes.
Interest was stated on the note at market rate, and payments were
being made until Estes Co. and Estes Homes began to experience
financial difficulties. Viewing the total picture, we conclude
that the loan was an isolated violation of the prudent investor
rule, but that violation was not so serious as to constitute a
violation of the exclusive benefit requirement of section 401(a).
In Winger's Dept. Store, Inc. v. Commissioner, 82 T.C. 869
(1984), the trustees of an employer-sponsored defined benefit
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