- 16 -
investments. Respondent further contends that the 23 loans were
not isolated incidents but reflected an investment policy
benefiting the plan trustee as an individual. Additionally,
respondent contends that the 23 loans did not comply with the
Defined Benefit Plan provisions.12
Whether a plan has been operated for the exclusive benefit
of employees and their beneficiaries is determined on the basis
of the facts and circumstances. See Feroleto Steel Co. v.
Commissioner, 69 T.C. 97, 107 (1977); sec. 1.401-1(b)(3), Income
Tax Regs.; see also Bernard McMenamy, Contractor, Inc. v.
Commissioner, 442 F.2d 359 (8th Cir. 1971), affg. 54 T.C. 1057
(1970); Time Oil Co. v. Commissioner, 258 F.2d 237, 238-239 (9th
Cir. 1958), remanding 26 T.C. 1061 (1956). If a violation of the
exclusive benefit rule is found, then we look to the totality of
the transgressions that occurred in assessing whether it is an
abuse of discretion for the Commissioner to disqualify the plan.
The discretion to disqualify a plan should be exercised with
restraint, however, because the Department of Labor and the
Internal Revenue Service have a broad range of alternative
remedies available to ensure that a trust is properly
12Again, we note that respondent has combined the Money
Purchase Plan and the Defined Benefit Plan, as we have previously
found that Morrissey made a series of six loans to himself from
the Defined Benefit Plan assets.
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