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Background
Petitioner, an Iowa corporation since 1977 with its
principal place of business in Orange City, Iowa, engages in
farming operations. It uses the cash method of accounting with a
fiscal year ending July 31 to compute its income. Effective
August 1, 1990, petitioner adopted the ESOP (a defined
contribution plan) and a trust to hold and invest the ESOP’s
assets. The plan used a July 31 fiscal year end as its annual
accounting period. Before fiscal 1996, petitioner never
requested a determination letter from the Internal Revenue
Service regarding the ESOP’s status.3
Petitioner’s founder and president was Eugene Van Roekel.
He was also the only trustee and participant of the plan.
Petitioner twice purported to amend the ESOP--on December 29,
1994,4 effective for plan years beginning August 1, 1994, and
again on August 26, 1997.
Under the plan, petitioner’s board of directors had sole
discretion to decide the amount, if any, that petitioner would
contribute each year from its profits, except in cases where
payments became due on an ESOP loan. Moreover, petitioner was
3The record is unclear as to whether petitioner has since
requested a determination letter from the Internal Revenue
Service.
4Although the written amendment dated Dec. 29, 1994, is
unsigned, we do not address its validity, because the amendments
made therein do not affect the outcome of this case.
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Last modified: May 25, 2011