Prohibited Transaction Concern

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An Esop (formally a profit sharing plan) is being terminated. No contributions have been made to the plan for more than 15 years. Over the years, all the participants have been paid out their benefits in cash ... except for the sole/majority shareholder of the employer-sponsor. The plan's only remaining asset is about 22% of the outstanding shares.

The plan is now being terminated. The intent is for the owner/shareholder/participant/officer/employee to elect a direct transfer of these shares to an IRA. The IRA custodian has now raised the question of whether the transfer and/or holding of these shares in the owner's IRA constitutes a prohibited transaction and is requiring an opinion letter from me in order to accept the shares. Yikes and help!

BTW, the motivation for terminating the plan is to avoid the expense of performing an annual valuation. I'm told that the IRA custodian will accept an annual representation as to the value of the shares from the owner.

Any thoughts will be much appreciated.