Sole shareholder of corporate plan sponsor deposits $75,000 (personal funds) into the pension account. This is immediately followed by a $75,000 investment in a limited partnership, which is held in the name of the plan.

The individual states that the intention was to make a $75,000 personal investment in the partnership - this investment should be held for him personally. It should never have run through the pension plan.

By way of correction, we would like to simply retitle the investment to him personally. Does this seem reasonable? It doesn't seem like the plan was really affected either way.

There are obviously excise taxes due. Is the amount involved the entire $75,000? I can't think of what else it would be.

Any suggestions would be appreciated.

Med

Jaded response - is the investment now worth $150,000?

Now the serious response. You have two separate issues. First, the "mistaken" deposit of $75,000 to the plan. And second, the investment in the limited partnership.

Mistaken deposit. You can reverse contributions to the plan if they were a mistake of fact. But the IRS has taken a very narrow approach to this. The client needs to retain legal counsel to determine the best course of action here. You cannot just reverse the money out of the plan.

Investment in limited partnership. You need to determine if this was a PT. It may not be. Does the plan sponsor have a personal ownership interest in the LP (disregarding his supposed $75,000 interest!)?

The client really needs to retain legal cousel. This transaction is not transparent. It will show up on the trust accounting and thus could be caught on audit.

Thanks PiP. The problem is that there isn't actually any cash in the plan at this point. Further, because it just happened, the investment is actually worth LESS than what they paid, so the plan would be harmed by an exact return. I think you're right, this may be one for those who make the Big Bucks.

Med