Prohibited Transactions

[Dennis Povloski]

The ERISA Outline book says that the taxable period for determining the amount of the excise tax on a PT is the first of the following dates:

1. The date the IRS issues a notice of deficiency for the excise tax,

2. The date the tax is assessed, or

3. the date the transaction is corrected

I understand the corrected part, but what triggers the first two?

My example, a client has land in their 401(k), and they want to buy the land from the plan. If they buy the land and pay the excise tax, the transaction is not corrected, so the taxable period continues. What would cause the issuance of Notice of Deficiency, or cause the IRS to assess the tax?

I'm not an expert on PT's, but I want to give the client some things to consider with their attorney when they start considering this.

Any pointers would be greatly appreciated.