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Petitioner acknowledges that he is a disqualified person with
regard to the Plan because he owns Rollins, but he contends that
(1) none of the Borrowers was a disqualified person, (2) none of
the loans was a transaction between him and the Plan, and (3) he
“did not benefit from these loans, either in income or in his own
account”.
We agree with respondent’s conclusion as to section
4975(c)(1)(D).
Because of our concerns about how the statute should be
applied to the evidence of record, our conclusion that all of the
opinions relied on by both sides are fairly distinguishable, and
the absence of applicable Treasury regulations,8 we first
consider the background of section 4975.
b. Background: Sec. 503 (I.R.C. 1954); Sec. 4941 (TRA ‘69)
The Internal Revenue Code of 1954, as originally enacted,
provided that if a charitable organization (sec. 501(c)(3)) or a
trust which is part of an employees plan (sec. 401(a)) engaged in
a prohibited transaction, then the entity lost its section 501(a)
7(...continued)
the nature of the Plan’s other assets, or (2) either the
magnitude or the timing of the Plan’s obligations.
8 We note that sec. 53.4941(d)-2(f), Private Foundation
Excise Tax Regs., interprets sec. 4941(d)(1)(E), which is almost
exactly the same as sec. 4975(c)(1)(D). Neither side cites this
regulation for any purpose. Under the circumstances we do not
explore in the instant opinion whether this regulation provides
any insight into the meaning of sec. 4975(c)(1)(D).
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