Court cases upholding sanctions for taxpayers who attribute their plan's lack of compliance to negligent third-party administrators

[Guest Enda80]

Can anyone name some court cases that have upheld sanctions for nonamenders who attribute the unamended status of their plan to the negligence of third party administrators? Please give tax court or other appropriate citation information.

[J Simmons]

In Pawlak, TC Memo 1995-7, 69 TCM 1603 (January 10, 1995), the court observed that the employer/petitioner had (emphasis added):

"failed to prove its reasonable reliance on Corbel. Petitioner asserts

that at all times it relied on Corbel to ensure the Plans' compliance with

the law. The record does not contain any evidence supporting this

assertion other than statements made by Pawlak on behalf of petitioner.

Even if petitioner could demonstrate reliance on Corbel, our prior

opinions indicate that we will not excuse an employer's failure to

maintain a plan's qualified status because of reliance on others."

In Stark Truss Company, Inc., TC Memo 1991-329, 62 TCM 169 (July 17, 1991), the employer tried to argue that the IRS should cut it some slack on missed amendments because the employer had switched to a less experienced lawyer. That argument failed.

[Peter Gulia]

John, thanks for your great work in recalling and describing these Tax Court cases.

Here's pushing my luck, but do you know anything about whether Stark Truss Company pursued its remedies against the lawyer it said it relied on? Did it sue (or threaten to sue) for breach of contract or malpractice? And if so, did it succeed in getting some recovery?

[J Simmons]

John, thanks for your great work in recalling and describing these Tax Court cases.

Here's pushing my luck, but do you know anything about whether Stark Truss Company pursued its remedies against the lawyer it said it relied on? Did it sue (or threaten to sue) for breach of contract or malpractice? And if so, did it succeed in getting some recovery?

Sorry, Peter. I do not know if Stark Truss Company pursued any claims against the less experienced lawyer upon which Stark Truss had relied when it missed the updating amendment.

[Guest Enda80]

I posted on Linkedin about this. I will post here if I get any examples.