Calavera

I still can not see why contribution in stock to a pension plan would be considered a prohibited transaction. Everything I read is referring to either the Keystone case that was about truck terminals or the first definition under prohibited transaction regulations as “sale or exchange, or leasing, of any property between a plan and a party in interest/disqualified person”. Q&A46 is also about contribution of property to a plan. But, by regulations, a transfer of real or personal property by a party in interest to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes. So, again we are talking about real property and not stocks. Then we have Section 4975 talking about tax on prohibited transactions and it seems that one of the exemptions from 4975(d)(18) through 4975(d)(22) would apply. Furthermore, if it is a prohibited transaction and you need to correct it by selling stocks to a third party, it really means that you call your financial institution and ask them to sell the stock. Then you ask them to buy it back and you end up in the same position you were before the “correction” (assuming the same stock price and no fee for transactions), but now it is suddenly “corrected”. It seems ridiculous to me. Merlin or somebody else, please enlighten me why you think that contribution in stock is prohibited. Thanks in advance.

So, let me get it straight. If one person sole proprietor has a DB plan, he can sell some stocks, wire the proceed of this sale as his contribution to a DB plan, and buy the same number of shares as part of his investment (assuming the price of the share didn't change). But he cannot save a couple steps by making his contribution in stocks, which essentially will produce the same result. Is my understanding correct? Merlin, could you post the whole Q&A 46 from the 2002 ASPPA Conference?

Below is an extract from the 5500 manual which, unfortunately, does not provide a definite answer PRACTICE POINTER: When there is more than one owner, the type of entity sponsoring the plan determines whether Form 5500-EZ may be filed. There are no specific instructions about the treatment of a limited liability company (LLC) as an entity eligible to file Form 5500-EZ. An LLC elects whether to be treated as a partnership or as a corporation for tax purposes. As noted in the above example, a partnership with no employees may file the Form 5500-EZ, whereas a corporation with multiple owners but no employees may not file Form 5500-EZ; however, it is not clear that an LLC may file Form 5500-EZ simply because the entity elects to be treated as a partnership for tax purposes.

Another thing to look for. The contributions for the employees should be deducted on Dr.'s Schedule C reducing his NE from SE. His contribution should be deducted on his 1040.

Since all his emplyees were paid out, wouldn't both plans become the plans that cover only the sole owner of a business? Therefore the plans are not covered by ERISA, and the funds are subject to creditors.

Since the snapshot date is typically the last day of the prior plan year (12/31/2006), I think the 1983 GAM tables should be used.

It maybe a case when the assets was transferred from one custodian to another custodian during the year.

Instruction says to include any individual who terminated employment ... and/or received a cash distribution or deemed cash distribution of his or her accrued benefit. In case 1 you have 0% x $X = $0 (deemed cash distribution) In case 2 you have X% x $0 = $0 (deemed cash distribution) I think both cases should be reported on line 7h.

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