- 4 -
account to lend $200,100 to petitioner. Mr. Flaherty also
directed the trustee of his pension plan account to lend
petitioner an additional $25,900. Mr. Flaherty, as an officer of
petitioner, executed notes payable to the plans in exchange for
the loans. The loans were payable upon demand and provided for
interest at a market rate plus 1 percent. Petitioner timely paid
interest on the loans. While the loans were outstanding, each
plan listed the notes as assets on its books and records. The
principal of both loans was repaid on April 5, 1994.
Before his direction to the plans, Mr. Flaherty contacted
Marvin Braun (Mr. Braun) at U.S. Bank, National Association, and
discussed the loans. Mr. Braun is a lawyer and has provided
services for qualified retirement plans since 1971. Mr. Flaherty
asked whether, under the plan agreements, he could direct that
the loans be made and whether section 4975 would apply to
petitioner. Mr. Braun advised him that the loans could be made
and that section 4975 would not apply. Mr. Braun was aware of
the relationship between Mr. Flaherty and petitioner. In
directing that the loans be made, Mr. Flaherty relied on Mr.
Braun’s advice.
Petitioner did not file a Form 5330, Excise Tax Return, for
either of the years in issue. Respondent determined that
petitioner was a disqualified person within the meaning of
section 4975(a), that the loans were prohibited transactions
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011