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NON CASH CONTRIBUTION TO KEOUGH MPP


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3 replies to this topic

#1 GENE

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Posted 22 October 1999 - 04:54 PM

HOPEFULLY SOMEONE CAN HELP ON THIS ONE. I HAVE A C CORP CLIENT WHO SEVERAL YEARS AGO TOOK STOCK OPTIONS FROM A CUSTOMER IN LIEU OF CASH FOR SERVICES. THE CLIENT WOULD LIKE TO ASSIGN THE OPTIONS TO THE COMPANY RETIREMENT PLAN INSTEAD OF MAKING A CASH CONTRIBUTION TO THE PLAN. THE OPTIONS HAVE AN EXERCISE PRICE OF $3.50 PER SHARE AND THE STOCK IS PUBLICLY TRADING AT $63.50. CAN THE OPTIONS BE ASSIGNED TO THE MPP AS A CONTRIBUTION AT $3.50 PER SHARE. PLEASE CITE ANY APPLICABLE IRS REGS.

#2 Wessex

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Posted 22 October 1999 - 06:42 PM

No. There is DOL guidance (not regulations) that this is a prohibited transaction. Sorry, I don't have a cite.

#3 ERead

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Posted 22 October 1999 - 07:35 PM

I would have to agree that it isn't allowed - one item for contention would also be if the plan allowed "Property" as a contribution, most plans don't allow that type of a contribution. The other point would be that the employer would then be taking a deduction for income from a prior period of time...

I think he's out of luck, and will have to make what ever required contributions there are for the year in cash.

If you find something to the contrary though - please be sure to post it so as to enlighten the rest of us.

Thanks -

#4 GENE

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Posted 26 October 1999 - 04:07 PM

I found that the contribution of unencumbered
employer property by the employer would constitute a prohibited transaction under IRC
ss. 4975 (See CIR vs Keystone Consolidated Industries)