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There is no question but that improper trust administration
and investment policies may result in violations of the exclusive
benefit rule. See Winger's Depart. Store, Inc. v. Commissioner,
supra at 886. As in Winger's Depart. Store, Inc. v.
Commissioner, supra at 882, a major portion of the assets of
petitioner's pension trust was lent to Morrissey, petitioner's
sole shareholder and trustee of the Defined Benefit Plan. As in
Winger's Dept. Store, Inc. v. Commissioner, supra at 882, during
the years in issue, interest thereon not only was delinquent but
also was never paid, and all of the principal remains
outstanding.
The instant case is distinguishable from Shedco, Inc. v.
Commissioner, supra. The loan in that case was sought because
the trustee 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). The loan proceeds were not diverted
for the personal benefit of the plan trustee. Interest was
stated on the note at market rate, and payments were being made
until the construction company began to experience financial
difficulties. Moreover, the construction company's inability to
repay the loan resulted from a downturn in Arizona's real estate
market and not from impropriety on its part.
In the instant case, Morrissey's notes were backed by
nothing more than Morrissey's vested Accrued Benefit.
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