- 38 -
circumstances that the trust's investment practices violated the
exclusive benefit rule. Accordingly, we upheld the
Commissioner's determination that the plan was no longer
qualified.
The facts in Winger's Dept. Store, Inc. v. Commissioner,
supra, and Ada Orthopedic, Inc. v. Commissioner, supra, reveal
investment philosophies that were not aimed primarily at
providing benefits for the employees and their beneficiaries in
general but instead were aimed at benefiting the plan sponsors or
certain individuals. The investment practices in those cases
involved flagrant violations of the exclusive benefit rule.
As we stated previously, the record reveals that the loan
constituted an isolated violation of the prudent investor rule.
Mr. Shedd sought the loan because he believed it would be a good
investment for the plan, and not because he sought a benefit for
himself (other than as a beneficiary of the plan), petitioner,
Estes Co., or others. He recommended the loan because he had
extensive experience in the real estate financing area and
therefore he felt confident in his ability to evaluate the
investment. Mr. Shedd approached Estes Co. about the loan
because he believed that Estes Co. was strong financially, and he
trusted the abilities of its management personnel to maintain
that strong position. He assumed that Estes Co. would repay the
loan. Mr. Shedd made an error in judgment in having the plan
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011