- 12 - Petitioner contends that the Defined Benefit Plan did not violate the exclusive benefit rule and therefore should remain qualified. Respondent contends that the Defined Benefit Plan is not a qualified plan within the meaning of section 401(a) for plan year ended October 31, 1990, and thereafter because its investments and Morrissey's transfer of real property, on October 19, 1990, in an attempt to repay loans to him, violated the exclusive benefit requirement. Specifically, respondent contends that the Defined Benefit Plan failed to satisfy the exclusive benefit rule by investing almost all of its assets in 23 loans to the plan trustee.9 Section 404(a)(1)(A) provides that contributions to a pension trust are deductible by the employer if the trust is exempt from tax under section 501(a). In order for the trust to be entitled to tax-exempt status under section 501(a), a retirement plan must be established by an employer and meet all the requirements of section 401(a). See Professional & Executive 9Respondent seems to think that the Defined Benefit Plan and the Money Purchase Plan are one plan, as it appears respondent has combined the loans from both plans. See supra note 1. We previously found that from Nov. 14, 1979, to Feb. 17, 1989, the Defined Benefit Plan and Money Purchase Plan made 23 loans to Morrissey. See Morrissey v. Commissioner, T.C. Memo. 1998-443. In addition, we previously found that Morrissey transferred to the Money Purchase Plan his 50-percent interest in two parcels of unencumbered real estate and that he never transferred any value to the Defined Benefit Plan to repay his loans from the Defined Benefit Plan assets. See id.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011