Contribution of appreciated property to retirement plan

[bzorc]

A company wishes to make their annual pension plan contribution (DB or DC, does not matter for the example) with appreciated property. I know that for purposes of the contribution, the property is transferred into the plan at fair value; however, how does the appreciation of the property (for example, a $10,000 piece of property gets "contributed" to the plan at a time when its fair value is $40,000) get handled? Is it taxable at the company level?

Thanks for any replies.

[Belgarath]

I think it does matter what type of plan. Contribution of property to a pension plan (ok to a profit sharing in certain circumstances) is generally a prohibited transaction. For some references, you could look at DOL Regulation 2509.94-3, DOL Interpretive Bulletin 94-3, as well as Commissioner v. Keystone Consolidated Industries, Inc.

[Earl]

although a plan subject to min funding requires a cash contribution, I think that if you contribute property and:

if it has appreciated - you recognize the gain as if it was sold, and

if it has depreciated - you don't get to recognize the loss.

But i didn't look that up, it is just from memory.