                        T.C. Memo. 2011-62



                      UNITED STATES TAX COURT



         CHRISTY & SWAN PROFIT SHARING PLAN, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23853-09X.            Filed March 15, 2011.



     David S. Swan, Jr. (trustee), for petitioner.

     Kelly C. Scanlon, for respondent.



                        MEMORANDUM OPINION


     SWIFT, Judge:   Because petitioner’s plan provisions were not

amended to conform to statutory requirements, respondent

retroactively revoked petitioner’s tax-exempt status as a

qualified profit-sharing plan under section 401(a)1 for 2001 and


     1
      Unless otherwise indicated, all section references are to
                                                   (continued...)
                                 - 2 -

subsequent years.   Petitioner seeks declaratory judgment relief

as to the qualifying status of the plan.   Respondent moves under

Rule 121 for summary judgment.

                            Background

     In Florida in the early 1970s David S. Swan, Jr., began a

real estate business under the name David S. Swan, Jr., P.A.

(Swan P.A.).2   On January 1, 1976, Swan P.A. established the

Christy & Swan Profit Sharing Plan (the plan), petitioner herein.

Swan P.A. is the employer-sponsor and administrator of the plan.

For the years in issue Mr. Swan was the only participant and also

served as trustee of the plan.

     On September 24, 1986, respondent issued a favorable

determination letter concluding that the plan was a qualified

tax-exempt retirement plan under section 401(a).

     During 2000 and 2001 Congress enacted a number of changes

relating to qualified retirement plans in the Community Renewal

Tax Relief Act of 2000 (CRA), appendix G of the Consolidated

Appropriations Act, 2001, Pub. L. 106-554, 114 Stat. 2763 (2000),




     1
      (...continued)
the Internal Revenue Code (Code) applicable to the years before
us, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
     2
      Petitioner’s principal office was located in Florida at the
time of filing the petition.
                                - 3 -

and the Economic Growth and Tax Relief Reconciliation Act of 2001

(EGTRRA), Pub. L. 107-16, 115 Stat. 38.3

     On March 21, 2006, the plan filed its Form 5500-EZ, Annual

Return of One-Participant (Owners and Their Spouses) Retirement

Plan, for its 2005 plan year.

     Before the initiation of respondent’s audit of petitioner in

June 2007, the plan was not amended to comply with any of the

requirements of the above-referenced statutory amendments.

     On June 8, 2007, respondent began his examination of

petitioner’s Form 5500-EZ for 2005.

     On August 21, 2007, Mr. Swan, as trustee, signed and

provided to respondent a “Declaration” in which petitioner stated

generally that the plan was “amended” by general reference to

incorporate all statutory and regulatory amendments necessary to

retain qualified status under section 401(a).4


     3
      The specific changes to qualified retirement plans required
by these statutory amendments are described in some detail infra.
     4
      Mr. Swan’s August 21, 2007, Declaration stated as follows:

      Effective January 1, 1984 and extending indefinitely
      into the future, this Plan hereby accepts
      unconditionally any and all revisions, modifications,
      changes, deletions, additions, terminations, and other
      alterations that the Department of the Treasury may
      assess against this Plan with or without notification
      in any manner to the Trustee of the Plan. Any such
      revisions, modifications, changes, deletions,
      additions, terminations, and other alterations will
      automatically become an integral part of this plan
      with an effective date equal to the required effective
                                                    (continued...)
                                - 4 -

     On August 30, 2007, respondent sent petitioner a Form 886-A,

Explanation of Items, which stated that in respondent’s opinion

the plan had not been amended to reflect required statutory

changes.    Respondent also explained his closing agreement

program.5

     On September 18, 2007, Mr. Swan on behalf of petitioner sent

respondent a letter in which he asserted that the plan had ceased

to exist and that the plan had matured into a “Repository Trust”,

having discontinued contributions and the admission of new

participants.    Mr. Swan stated in his letter to respondent:   “As

such, any subsequent rules or laws applicable to profit sharing




     4
      (...continued)
      date of any such revisions, modifications, changes,
      deletions, additions, terminations, and other
      alterations required.
     5
      Respondent described the closing agreement program as
follows:

     A plan sponsor that does not come forward to the IRS,
     but which instead is discovered on audit to have
     significant problems in its plan, is entitled under the
     audit correction program to preserve the tax benefits
     associated with properly maintained retirement plans.
     Under this program, the plan sponsor pays a reasonable
     sanction that is based on an amount that is directly
     related to the amount of tax benefits preserved. The
     sanction imposed will bear a reasonable relationship to
     the nature, extent and severity of the failure, taking
     into account the extent to which correction occurred
     before audit.

See Rev. Proc. 2008-50, 2008-35 I.R.B. 464. Petitioner did not
participate in respondent’s closing agreement program.
                                - 5 -

plans are not applicable as this Plan ceased to be a Profit

Sharing Plan as of 1/1/01.”

     On September 28, 2007, respondent sent to petitioner a

revised Form 886-A, which stated that the plan had failed to

timely amend consistent with the above-referenced statutory

requirements.   In this letter respondent once again explained the

closing agreement program.    Again, Mr. Swan informed respondent

that the plan would not be participating in the closing agreement

program.

     On December 20, 2007, respondent mailed petitioner a letter

stating that petitioner’s case would be closed with the unagreed

revocation of the plan’s tax-exempt status as a qualified profit-

sharing plan under section 401(a).

     On December 26, 2007, Mr. Swan sent respondent a letter in

which he, as trustee of the plan, stated his intent to abandon

all future discussions with respondent regarding the tax-exempt

qualified status of the plan and to take the issue to court.

     On July 9, 2009, respondent sent Mr. Swan a letter informing

Mr. Swan that disqualification of the plan was necessary because

the plan had failed to timely amend regardless of whether the

plan still permitted contributions or admission of new

participants.

     On July 24, 2009, respondent sent to Mr. Swan a final

revocation letter with regard to the plan’s tax-exempt status.
                                 - 6 -

This letter was returned to respondent unclaimed by Mr. Swan or

by petitioner.6

     On August 17, 2009, Mr. Swan on behalf of petitioner sent

respondent a letter explaining that the plan was so simple that

any new statutory requirements could not possibly affect or be

applicable to the plan.

     On September 16, 2009, respondent sent a second final

revocation letter to Mr. Swan as trustee of the plan stating that

the plan’s qualified status for the plan year ending December 31,

2001, and for subsequent years was revoked.

     On October 6, 2009, petitioner filed the petition herein

seeking a declaratory judgment that the plan had not lost its

status as a qualifying plan under section 401(a).

                            Discussion

     Summary judgment may be an appropriate method for resolving

a declaratory judgment action.    Rule 217(b)(2).   When no material

fact remains at issue, we may grant summary judgment as a matter

of law.   Rule 121(b); Fla. Country Clubs, Inc. v. Commissioner,

122 T.C. 73, 75-76 (2004), affd. on other grounds 404 F.3d 1291

(11th Cir. 2005).




     6
      Petitioner argues that because respondent’s July 24, 2009,
letter was not sent to the plan or to Mr. Swan in his capacity as
a trustee thereof, the letter was defective. We address this
issue in greater detail infra.
                               - 7 -

     The party moving for summary judgment bears the burden of

proving that no genuine issue of material fact exists.

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd.

17 F.3d 965 (7th Cir. 1994).   All facts are viewed in the light

most favorable to the nonmoving party.    Id.   Where, however, a

motion for summary judgment has been properly made and supported,

the opposing party may not rest upon mere allegations or denials

but must by affidavits or otherwise set forth specific facts

showing that there is a genuine issue for trial.    Rule 121(d);

Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Sundstrand

Corp. v. Commissioner, supra at 520.

     The burden of establishing the nonexistence of a genuine

factual issue is on the party moving for summary judgment; and

where the evidentiary matter in support of the motion does not

establish the absence of a genuine issue, we will deny summary

judgment.   Adickes v. S.H. Kress & Co., 398 U.S. 144, 160 (1970);

Robinson v. Commissioner, T.C. Memo. 2005-70.

     Section 401(a) sets forth the requirements that must be met

by a trust forming part of a profit-sharing plan in order for the

trust to be eligible for favorable tax treatment.    Section

7476(a) confers jurisdiction on this Court to issue declaratory

judgments as to the initial and continuing qualification of a

retirement plan under section 401(a).    In a declaratory judgment

action, we are limited to deciding whether respondent, in making
                               - 8 -

a determination as to the initial or continuing qualification of

a retirement plan under section 401(a), properly applied the

relevant law to the facts presented.   Stepnowski v. Commissioner,

124 T.C. 198, 204 (2005), affd. 456 F.3d 320 (3d Cir. 2006);

Thompson v. Commissioner, 71 T.C. 32, 36-37 (1978); see also

Simmons v. Commissioner, T.C. Memo. 1995-422 (noting that section

7476 “does not provide a broad grant of authority to the Court to

conduct a review of factual matters related to controversies over

retirement plans and to fashion equitable remedies to resolve

these controversies”).

     Respondent has broad discretion under section 7805(b) to

revoke a ruling retroactively, and his determination is

reviewable by the courts only for abuse of discretion.    Auto.

Club of Mich. v. Commissioner, 353 U.S. 180, 184 (1957); Va.

Educ. Fund v. Commissioner, 85 T.C. 743, 752 (1985), affd. 799

F.2d 903 (4th Cir. 1986).   With regard to retroactive revocation

of a prior favorable ruling, respondent has stated as follows:

          (5) Except in rare or unusual circumstances, the
     revocation or modification of a ruling will not be
     applied retroactively with respect to the taxpayer to
     whom the ruling was originally issued or to a taxpayer
     whose tax liability was directly involved in such
     ruling if (i) there has been no misstatement or
     omission of material facts, (ii) the facts subsequently
     developed are not materially different from the facts
     on which the ruling was based, (iii) there has been no
     change in the applicable law, (iv) the ruling was
     originally issued with respect to a prospective or
     proposed transaction, and (v) the taxpayer directly
     involved in the ruling acted in good faith in reliance
                                - 9 -

     upon the ruling and the retroactive revocation would be
     to his detriment. * * *

Sec. 601.201(l)(5), Statement of Procedural Rules (emphasis

added).

     In this case, respondent’s basis for retroactively revoking

the plan’s qualifying status under section 401(a) is that the

plan was not amended to incorporate statutory requirements

enacted during 2000 and 2001.

     Petitioner raises five arguments, which we discuss below.

Timeliness

     Petitioner argues that respondent’s September 16, 2009,

letter was not timely.7   Petitioner claims that the “statute of

limitations” for the plan’s 2005 year expired on July 31, 2009,8

and that respondent therefore was barred from revoking the plan’s

tax-exempt status for 2005 and earlier plan years.   Petitioner’s

argument is without merit.




     7
      For the limited purpose of petitioner’s timeliness
contention, we assume arguendo that respondent’s July 24, 2009,
final revocation letter was, as petitioner asserts, defective and
thus void.
     8
      July 31, 2009, is 3 years after petitioner’s 2005 Form
5500-EZ was due. Generally, a Form 5500-EZ must be filed by the
last day of the seventh calendar month after the end of the plan
year. Petitioner’s 2005 plan year ended on Dec. 31, 2005.
Without extensions, the last day to file the plan’s 2005 Form
5500-EZ was July 31, 2006.
                              - 10 -

     The period of limitations prescribed by section 6501(a)9 is

a limitation on the assessment and collection of taxes; it does

not limit respondent’s broad authority to audit retirement plans

and, if appropriate, to revoke retroactively a favorable

determination letter.   The period of limitations prescribed by

section 6501(a) is applicable neither to proceedings under

section 7476 nor to respondent’s determinations regarding the

continued qualification of retirement plans under section 401(a),

as they do not involve the imposition of any tax.10   Yarish

Consulting, Inc. v. Commissioner, T.C. Memo. 2010-174; Roblene,

Inc. v. Commissioner, T.C. Memo. 1999-161.   Accordingly,

respondent’s revocation action was not improper by operation of

any period of limitations.

Incorrect Information

     Petitioner asserts that exhibits 14 and 15 attached to

respondent’s motion for summary judgment (purporting to represent

petitioner’s 2006 and 2005 Forms 5500-EZ, respectively) are




     9
      Sec. 6501(a) provides in part: “Except as otherwise
provided in this section, the amount of any tax imposed by this
title shall be assessed within 3 years after the return was filed
* * * and no proceeding in court without assessment for the
collection of such tax shall be begun after the expiration of
such period.”
     10
      There are five jurisdictional limitations set forth in
sec. 7476(b) restricting this Court’s authority to make
declaratory judgments. All five jurisdictional requirements have
been met in this case.
                                - 11 -

“frauds” and that any revocation action by respondent based

thereon must be erroneous.   We disagree.

     Exhibits 14 and 15 attached to respondent’s motion for

summary judgment are identical to Exhibits 14-R and 15-R,

respectively, of the administrative record filed herein.

Generally, the facts represented in an administrative record are

assumed to be true.   Rule 217(b); Romann v. Commissioner, 111

T.C. 273, 274 (1998).   Petitioner offers no evidentiary support

for the contention that respondent’s exhibits are fraudulent or

incorrect.   Mere allegations by the taxpayer are insufficient to

show the existence of a genuine issue for trial.   Rule 121(d);

Celotex Corp. v. Catrett, 477 U.S. at 324; Sundstrand Corp. v.

Commissioner, 98 T.C. at 520.

Rev. Rul. 69-157, 1969-1 C.B. 115

     Petitioner argues that notwithstanding its failure to timely

amend for statutory changes, the plan retained its qualified

status pursuant to Rev. Rul. 69-157, supra.

     This revenue ruling addresses the issue of whether a trust

retains its exempt status where a plan has discontinued

contributions but otherwise continues in effect until all assets

have been distributed from the plan’s trust.   This ruling does

not address the issue of a plan’s qualified status where a plan

has failed to timely amend as required by statutory changes.

Petitioner’s reliance on Rev. Rul. 69-157, supra, is misplaced.
                              - 12 -

Repository Trust

     Petitioner argues that because the plan in 2001 discontinued

receiving contributions and barred admission of new participants,

the plan ceased to exist and thereafter matured into a

“Repository Trust”.   What petitioner means by the term

“Repository Trust” is not clear;11 however, we believe petitioner

argues that the plan terminated in or around 2001 and therefore

was not required to amend for the above-referenced statutory

enactments.   We disagree.

     Retirement plan terminations are formal events that have

distinct requirements.   Notably, formal plan terminations require

that termination dates be established, the benefits of plan

participants (and other liabilities under the plans) be

determined with respect to the termination date, and all plan

assets be distributed to satisfy those liabilities in accordance

with the terms of the plan as soon as administratively feasible

after the termination date.   Rev. Rul. 89-87, 1989-2 C.B. 81.

Petitioner offers no evidence to show that the plan has been

formally terminated, and petitioner’s reliance on the allegation

that the plan discontinued receiving contributions and barred

admission of new participants thereby causing a termination of



     11
      Respondent suggests that petitioner is referring to a
“wasting trust” or a trust that remains in effect after a plan
has been terminated for the purpose of distributing plan assets.
See, e.g., Rev. Rul. 89-87, 1989-2 C.B. 81.
                               - 13 -

the plan is insufficient to create a genuine issue for trial.

See Rule 121(d); Celotex Corp. v. Catrett, supra at 324;

Sundstrand Corp. v. Commissioner, supra at 520.

     Termination of a retirement plan will always cause a

discontinuance of contributions, but a discontinuance of

contributions might occur without a formal termination of the

plan.    Tionesta Sand & Gravel, Inc. v. Commissioner, 73 T.C. 758,

762 (1980), affd. without published opinion 642 F.2d 444 (3d Cir.

1981).    As noted above, Rev. Rul. 69-157, supra, provides that a

trust which is part of a qualified plan--and has not been

formally terminated--may retain its tax-exempt status despite the

fact that contributions have been discontinued.   Because no

formal termination occurred, the plan was still required to

comply with the requirements of section 401(a) in order for the

plan to be eligible for continued favorable tax treatment.

No Meaningful Purpose

     Respondent’s basis for retroactively revoking the plan’s

qualifying status under section 401(a) is that the provisions of

the plan were not amended to conform to certain changes in

applicable law.   Petitioner has admitted this failure.

Petitioner argues, however, that because the plan was so simple,

there was no need to amend the plan for statutory changes that

would have had no effect on the operation of the plan.    According
                                - 14 -

to petitioner, any amendments to the plan would have had no

meaningful purpose.     We disagree with petitioner.

     A qualified profit-sharing plan must meet statutory

requirements both by its terms and in its operations.       Buzzetta

Constr. Corp. v. Commissioner, 92 T.C. 641, 646 (1989).          The

evaluation of the plan’s failure to amend to meet statutory

changes must be made in the context of what might have happened,

not what actually occurred, during the years in issue.       Basch

Engg. Inc. v. Commissioner, T.C. Memo. 1990-212.       In that

context, we review briefly the amendments to the plan that were

required by the above-referenced statutory changes.

The Community Renewal Tax Relief Act of 2000

     CRA was enacted on December 21, 2000.12    CRA sec. 314(e),

114 Stat. 2763A-643, amended, inter alia, section 415(c)(3)(D) of

the Code to require that a plan broaden its definition of

compensation to include qualified transportation fringe benefits

under section 132(f).     The plan was never amended to include

qualified transportation fringe benefits described in section

132(f) as required by the CRA.13    The fact that no such fringe


     12
      This amendment had retroactive effect, relating back to
the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 788.
     13
          The plan provided:

     1.19 “415 Compensation” with respect to any Participant
     means such Participant’s wages as defined in Code
     Section 3401(a) and all other payments of compensation
                                                   (continued...)
                               - 15 -

benefits were provided by Swan P.A. does not cure this defect.

“[T]he fact that the defective plan provision did not become

operative does not mean that the plan meets the [statutory]

requirements”.    Tionesta Sand & Gravel, Inc. v. Commissioner,

supra at 764.    It is possible that during the years in issue Swan

P.A. could have provided qualified transportation fringe benefits

to its employee(s) under section 132(f), and these benefits would

have to have been included in the plan’s definition of

compensation.


     13
      (...continued)
     by the Employer (in the course of the Employer’s trade
     or business) for a Calendar Year ending with or within
     the Plan Year for which the Employer is required to
     furnish the Participant a written statement under Code
     Sections 6041(d), 6051(a)(3) and 6052. “415
     Compensation” must be determined without regard to any
     rules under Code Section 3401(a) that limit the
     remuneration included in wages based on the nature or
     location of the employment or the services performed
     (such as the exception for agricultural labor in Code
     Section 3401(a)(2)).

     For Plan Years beginning after December 31, 1997, for
     purposes of this Section, the determination of “415
     Compensation” shall include any elective deferral (as
     defined in Code Section 402(g)(3)), and any amount
     which is contributed or deferred by the Employer at the
     election of the Participant and which is not includible
     in the gross income of the Participant by reason of
     Code Sections 125 or 457.

     If, in connection with the adoption of this amendment
     and restatement, the definition of “415 Compensation”
     has been modified, then, for Plan Years prior to the
     Plan Year which includes the adoption date of this
     amendment and restatement, “415 Compensation” means
     compensation determined pursuant to the Plan then in
     effect.
                                - 16 -

The Economic Growth and Tax Relief Reconciliation Act of 2001

     EGTRRA was enacted on June 7, 2001.14    EGTRRA secs.

641(a)(1)(A) and (b)(2), 115 Stat. 118, 120, required qualified

plans to amend their definition of an eligible retirement plan to

include eligible deferred compensation plans under section 457(b)

and annuity contracts under section 403(b), respectively.    The

plan’s definition of eligible retirement plan was never amended

to include annuity contracts or eligible deferred compensation

plans.15    The fact that no such annuity contracts or eligible


     14
      This amendment applies to distributions occurring after
Dec. 31, 2001. EGTRRA sec. 641(f)(1), 115 Stat. 121.
     15
          The plan provided:

     7.11 DIRECT ROLLOVER--(a) Notwithstanding any provision
     of the Plan to the contrary that would otherwise limit
     a distributee’s election under this Section, a
     distributee may elect, at the time and in the manner
     prescribed by the Administrator, to have any portion of
     an eligible rollover distribution that is equal to at
     least $500 paid directly to an eligible retirement plan
     specified by the distributee in a direct rollover.

     (b) For purposes of this Section the following
     definitions shall apply:

     (1) An eligible rollover distribution is any
     distribution of all or any portion of the balance to
     the credit of the distributee, except that an eligible
     rollover distribution does not include: any
     distribution that is one of--a series of substantially
     equal periodic payments (not less frequently than
     annually) made for the life (or life expectancy) of the
     distributee or the joint lives (or joint life
     expectancies) of the distributee and the distributee’s
     designated beneficiary, or for a specified period of
     ten years or more; any distribution to the extent such
                                                   (continued...)
                             - 17 -

deferred compensation plans were part of the plan during the

years in issue does not cure this defect in the plan.

     EGTRAA sec. 657(a)(1), 115 Stat. 135, amended section

401(a)(31) of the Code by adding subparagraph (B) requiring that

mandatory distributions greater than $1,000 but less than $5,000

from a qualified plan be paid in a direct rollover to an

individual retirement plan if the distributee fails to make a

distribution election and that the plan administrator provide the


     15
      (...continued)
     distribution is required under Code Section 401(a)(9);
     the portion of any other distribution that is not
     includible in gross income (determined without regard
     to the exclusion for net unrealized appreciation with
     respect to employer securities); and any other
     distribution that is reasonably expected to total less
     than $200 during a year.

     (2) An eligible retirement plan is an individual
     retirement account described in Code Section 408(a), an
     individual retirement annuity described in Code Section
     408(b), an annuity plan described in Code Section
     403(a), or a qualified trust described in Code Section
     401(a), that accepts the distributee’s eligible
     rollover distribution. However, in the case of an
     eligible rollover distribution to the surviving spouse,
     an eligible retirement plan is an individual retirement
     account or individual retirement annuity.

     (3) A distributee includes an Employee or former
     Employee. In addition, the Employee’s or former
     Employee’s surviving spouse and the Employee’s or
     former Employee’s spouse or former spouse who is the
     alternate payee under a qualified domestic relations
     order, as defined in Code Section 414(p), are
     distributees with regard to the interest of the spouse
     or former spouse.

     (4) A direct rollover is a payment by the Plan to the
     eligible retirement plan specified by the distributee.
                               - 18 -

distributee written notice thereof.16     A review of the plan shows

no inclusion of either the automatic rollover provision or the

notice provision required by amended section 401(a)(31)(B).

                             Conclusion

      The requirements that a plan must satisfy for qualification

under section 401(a) must be strictly met.     Vague, general

references in plan correspondence to such requirements are

insufficient.   “Congress has decided that these changes are

necessary in the retirement plan area and we do not second guess

its wisdom.”    Hamlin Dev. Co. v. Commissioner, T.C. Memo. 1993-

89.

      Reviewing the facts in the light most favorable to

petitioner, we conclude that no genuine issue of material fact

exists requiring a trial, and that, as a matter of law,

respondent is entitled to summary judgment.




      16
      This amendment applies to distributions occurring after
Mar. 28, 2005. EGTRRA sec. 657(d), 115 Stat. 137, provides:
“The amendments made by this section shall apply to distributions
made after final regulations implementing subsection (c)(2)(A)
are prescribed.” The regulations referenced in EGTRRA sec.
657(c)(2)(A), 115 Stat. 137, relate to safe harbor provisions
promulgated by the Department of Labor (DOL) pertaining to sec.
401(a)(31)(B) of the Code. These DOL regulations were issued on
Sept. 28, 2004, and became effective on Mar. 28, 2005. See 29
C.F.R. sec. 2550.404a-2(e) (2005).
                             - 19 -

     In reaching our decision, we have considered all of the

arguments raised by petitioner, and to the extent not mentioned

herein, we conclude they are moot, irrelevant, or without merit.


                                        An appropriate order and

                                   decision will be entered

                                   for respondent.
