- 39 -
lend most of the plan's assets to one borrower and in not
securing the note.
In the instant case, we do not find the indifference toward
the continued well-being of the plan that we found in Winger's
Dept. Store, Inc. v. Commissioner, supra and in Ada Orthopedic
Inc. v. Commissioner, supra. Interest on the loan was paid
timely until January 1989, when a depression in the real estate
market in Arizona resulted in financial problems for Estes Co.
and Estes Homes. Additionally, although the loan was extended on
a demand basis on December 25, 1986, in order to diversify the
plan's assets, during 1987 Mr. Shedd sought and obtained Estes
Co.'s agreement to amortize payment of the loan over a 5-year
period, commencing in March 1988. Two payments of $250,000 each
were made during 1988, and the plan used the payments to acquire
other, safer investments for the plan. Additionally, after Estes
Co. defaulted on payment of the note, Mr. Shedd took an active
role in attempting to locate assets of the Estes companies which
could be used toward payment of the loan. Estes Co.'s inability
to repay the loan resulted from a downturn in the real estate
market and not from impropriety on its part.
The longstanding business relationship between petitioner
and Estes Co., and among the Shedds, Mr. Estes, and the Estes
companies, requires that we give the loan closer scrutiny.
Nevertheless, even after that scrutiny, we do not find an attempt
to manipulate the plan's assets for the benefit of petitioner,
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