                         RECOMMENDED FOR FULL-TEXT PUBLICATION
                             Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                      File Name: 13a0166p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                                 X
                                                  -
 In re JAMES L. DALEY, JR.,
                                                  -
                                Debtor.
 _____________________________________            -
                                                  -
                                                      No. 12-6130

                                                  ,
                                                   >
                          Plaintiff-Appellant, -
 JAMES L. DALEY, JR.,

                                                  -
                                                  -
                                                  -
           v.
                                                  -
                                                  -
                         Defendant-Appellee. -
 ANN REILLY MOSTOLLER,
                                                 N
                   Appeal from the United States District Court
                for the Eastern District of Tennessee at Knoxville.
              No. 3:11-cv-00565—Thomas A. Varlan, District Judge.
                                     Argued: June 13, 2013
                              Decided and Filed: June 17, 2013
      Before: MARTIN and SUTTON, Circuit Judges; ADAMS, District Judge.*

                                      _________________

                                            COUNSEL
ARGUED: John P. Newton, LAW OFFICE OF MAYER & NEWTON, Knoxville,
Tennessee, for Appellant. Al Holifield, HOLIFIELD & ASSOCIATES, PLLC,
Knoxville, Tennessee, for Appellee. ON BRIEF: John P. Newton, LAW OFFICE OF
MAYER & NEWTON, Knoxville, Tennessee, for Appellant. Al Holifield, HOLIFIELD
& ASSOCIATES, PLLC, Knoxville, Tennessee, for Appellee. Melanie Franco
Nussdorf, STEPTOE & JOHNSON LLP, Washington, D.C., for Amicus Curiae.




        *
           The Honorable John R. Adams, United States District Judge for the Northern District of Ohio,
sitting by designation.


                                                  1
No. 12-6130        In re Daley                                                    Page 2


                                  _________________

                                       OPINION
                                  _________________

       SUTTON, Circuit Judge. Generally speaking, the assets in an individual
retirement account are off limits from tax collectors and creditors in bankruptcy. Yet if
the owner of a retirement account uses it in a prohibited way, the taxation and
bankruptcy protection disappears. After saving $66,000 in an IRA with Merrill Lynch,
James Daley filed a Chapter 7 bankruptcy petition. The bankruptcy court and the district
court thought that Daley had impermissibly used the IRA to extend himself credit by
granting Merrill Lynch a lien on the retirement funds to cover any potential future debts
to the firm. We reverse.

                                            I.

       Daley opened an IRA with Merrill Lynch by rolling over $64,646 from another
financial institution. Before doing so, Daley signed a Client Relationship Agreement
with Merrill Lynch, which contained the following “liens” provision:

       All of your securities and other property in any account—margin or
       cash—in which you have an interest, or which at any time are in your
       possession or under your control, shall be subject to a lien for the
       discharge of any and all indebtedness or any other obligations you may
       have to Merrill Lynch.

R.1-14 at 11. By signing the agreement, Daley thus pledged his IRA as security for any
future debts to Merrill Lynch.

       No debts ever arose, whether at the time Daley opened the account or later.
Merrill Lynch, it is true, offers other types of accounts that do carry debt risks, and
Daley might well have opened one—say a margin-trading account that allows customers
to purchase securities with money borrowed from the broker. But Daley never opened
this kind of account or any other, and he thus never became indebted to Merrill Lynch.
Outside of his account with Merrill Lynch, Daley also did not withdraw money from his
IRA, borrow from it or use it as collateral for a loan of any sort.
No. 12-6130        In re Daley                                                    Page 3


       Two years after opening the account, Daley sought protection from his creditors
by filing a Chapter 7 bankruptcy petition. Seeking to protect his retirement savings from
creditors, Daley invoked the exception for IRAs. See 11 U.S.C. § 522(b)(3)(C). The
bankruptcy trustee, Ann Mostoller, objected, contending that the IRA lost its exempt
status when Daley signed the Client Relationship Agreement and granted the lien to
Merrill Lynch. The bankruptcy court and the district court agreed with the trustee.
Daley appeals and in the process has received considerable support from an amicus
curiae, the Securities Industry and Financial Markets Association.

                                           II.

       The Bankruptcy Code explains how to treat a Chapter 7 debtor’s assets—what
goes to creditors and what remains exempt. The bankruptcy trustee obtains control of
the debtor’s non-exempt property and distributes it to creditors. 11 U.S.C. § 541(a). A
debtor may exempt “retirement funds” if they are in an “account that is exempt from
taxation under section” 408 of the tax code. Id. § 522(b)(3)(C). Section 408 designates
certain trusts as “individual retirement account[s],” 26 U.S.C. § 408(a), and says that
“[a]ny individual retirement account is exempt from taxation.” Id. § 408(e).

       An IRA loses its tax-exempt status if the owner “engages in any transaction
prohibited by section 4975” of the tax code. Id. § 408(e)(2)(A). There are six such
transactions, including the one bedeviling Daley: “any direct or indirect” “lending of
money or other extension of credit” between the IRA and its owner. Id. § 4975(c)(1)(B).
The question is whether Daley used his IRA to obtain credit from Merrill Lynch,
resulting in an indirect extension of credit between Daley and the IRA.

       We think not for several reasons. To start, there is a statutory presumption that
his account is exempt. If a retirement fund “has received a favorable determination”
from the IRS, “those funds shall be presumed to be exempt from the estate.” 11 U.S.C.
§ 522(b)(4)(A). The trustee concedes that Daley had a favorable determination in effect
when he filed his bankruptcy petition. A letter from the IRS stated that Merrill Lynch’s
IRAs “satisf[ied] the requirements of” the retirement-account exemption. R.1-20 at 8.
No. 12-6130         In re Daley                                                     Page 4


        In the second place, the exemption does not apply in this setting. Yes, the phrase
“any direct or indirect . . . lending of money or other extension of credit” is broad.
26 U.S.C. § 4975(c). “Any” and “direct or indirect” are roomy terms; so too are
“extension[s]” of “credit,” as other provisions in the United States Code confirm. See
18 U.S.C. § 891(1) (“To extend credit means to make or renew any loan, or to enter into
any agreement . . . whereby the repayment or satisfaction of any debt or claim . . . may
or will be deferred.”); 15 U.S.C. § 1602(f) (“The term ‘credit’ means the right granted
by a creditor to a debtor to defer payment of debt or to incur debt and defer its
payment.”); 12 U.S.C. § 84(b)(1) (“[T]he term ‘loans and extensions of credit’ shall
include . . . all direct or indirect advances of funds to a person made on the basis of any
obligation of that person to repay the funds or repayable from specific property pledged
by or on behalf of the person . . . .”).

        But this breadth of phrasing still demands the “lending of money or other
extension of credit between a plan [the IRA] and a disqualified person [Daley],”
26 U.S.C. § 4975(c)(1)(B), and nothing of the sort happened here. The salient reality is
that Daley never borrowed from the IRA, and Merrill Lynch never extended credit to
Daley based on the existence of the IRA. That a lien in some settings may be granted
in connection with an extension of credit does not establish that any loan or other
extension of credit occurred here. It did not. Daley never opened any other accounts
with Merrill Lynch, margin-trading or otherwise. Daley thus never authorized Merrill
Lynch to advance funds or securities, removing the possibility that he could become
indebted to the securities firm. The only debtor was Merrill Lynch, which could be
asked to deliver the funds to another firm if Daley rolled them over to another account
or which could be asked to make payouts to Daley.

        The lien provision was contingent on an event that never occurred, and above all
could not occur until Daley opened a separate account. It is one thing to say that Merrill
Lynch extends credit any time a customer opens a margin-trading account (and thus that
a lien on an IRA acts as an extension of credit between the IRA and its owner), even in
the absence of actual margin trading; it is quite another to say that Merrill Lynch
No. 12-6130        In re Daley                                                     Page 5


extended credit to a nonexistent margin-trading account. Daley’s naked lien, stripped
of any connection to a credit transaction, was not an extension of credit.

       Consistent with this analysis, the IRS in 2011 announced that lien provisions like
the one in the Daley-Merrill Lynch contract would not destroy an IRA’s tax exempt
status. IRS Announcement 2011-81, 2011-52 I.R.B. 1052. The mere existence of a
“cross-collateralization agreement,” as the IRS calls it, does not by itself disqualify an
IRA from exempt status. At most, it is the actual use of such an agreement—and the
prohibited extension of credit through it in a later transaction—that might disqualify a
retirement account.

       In reaching a contrary conclusion, the bankruptcy court invoked an advisory
opinion by the Department of Labor, which shares administrative authority over
retirement accounts with the IRS. Reorganization Plan No. 4 of 1978, 5 U.S.C. app. 1;
CIR v. Keystone Consol. Indus., Inc., 508 U.S. 152, 158 (1993) (“[B]oth the Internal
Revenue Service and the Department of Labor administer [§ 4975’s] prohibited-
transaction provisions.”). Granting a security interest in an IRA to cover debt in a non-
IRA account, the Department said, “would amount to an extension of credit by the IRA
to the IRA owner.” Emp. Benefits Sec. Admin., U.S. Dep’t of Labor, Advisory Op.
2009-03A at 3. But three considerations weaken this authority. The advisory opinion
concerns a fact pattern that did not arise here—the opinion of a second account.
Advisory opinions from the Department have no precedential effect: “Only the parties
described in the request for opinion may rely on the opinion.” Advisory Op. Procedure,
41 F.R. 36281, 36283 (Aug. 27, 1976). And the Department at any rate is rethinking its
position. The impetus for the IRS announcement, indeed, came when the Department
of Labor advised the IRS that it was “considering further action” concerning cross-
collateralization liens, “including consideration of a class exemption request expected
to be submitted to the” Department. 2011-52 I.R.B. at 1052. The IRS thus decided to
treat cross-collateralization liens as tax exempt “[p]ending further action by the”
Department. Id. The Labor Department’s view is in flux, and although an agency
opinion of this sort may be “entitled to respect,” Skidmore v. Swift & Co., 323 U.S. 134,
No. 12-6130         In re Daley                                                       Page 6


140 (1944), even that modest influence is unavailing when the agency’s position is a
moving target.

        The trustee adds that the IRA lien amounted to an extension of credit even if
Daley never opened any other accounts because the IRA itself could have placed Daley
in debt to Merrill Lynch. But Mostoller never explains why—never explains how
Daley’s $66,000 retirement account, even after accounting for the automatic withdrawal
of ordinary account fees, could itself create debt.

        The trustee also notes that the IRS Announcement does not apply to Daley,
claiming that his account is not a cross-collateralization agreement. But it is. The IRS
Announcement describes such agreements by citing a Department of Labor advisory
opinion that quotes a lien provision identical in all relevant particulars to the one Merrill
Lynch required Daley to sign. See 2011-52 I.R.B. at 1052; U.S. Dep’t of Labor,
Advisory Op. 2009-03A at 1. The trustee adds that the IRS ruling exempts cross-
collateralization agreements only if “there has been no execution or other enforcement
pursuant to the agreement against the assets of an IRA account.” 2011-52 I.R.B. at
1052. As the trustee sees it, she is executing against Daley’s retirement account in the
bankruptcy proceeding.        But “enforcement pursuant to the agreement” means
enforcement by a party to the contract, which is to say Merrill Lynch’s execution of the
lien against Daley’s retirement account. The trustee has no more rights than Merrill
Lynch to the assets in the IRA, and Merrill Lynch currently has none.

        Janpol v. CIR, 101 T.C. 518 (1993), changes nothing. An employer guaranteed
loans—loans made by a third party to an employee profit-sharing plan—prompting an
inquiry into whether the guarantee amounted to an extension of credit between the
employer and its benefit plan under § 4975. Janpol argued that he did not extend credit
because the guarantee was conditioned on a loan default, which never occurred. The tax
court disagreed, reasoning that a guarantee “is prohibited whether or not the condition
for liability to the third party has arisen” because the contract itself creates a “potential
for abuse.” 101 T.C. at 527. Even if Janpol were binding authority, even if “potential
for abuse” were the lodestar for construing “extension of credit” and even if the IRS had
No. 12-6130          In re Daley                                                    Page 7


not twice blessed Merrill Lynch retirement accounts, Daley’s situation is one significant
step removed from Janpol’s. Daley never opened any accounts other than his IRA, and
there was thus no possibility that he could be subjected to liability. If Janpol had merely
agreed to guarantee against the possibility of future loans, loans that no one ever
authorized or made, we think his case would have come out differently.

          Willis v. Menotte does not help the trustee either. No. 09-82303, 2010 WL
1408343 (S.D. Fla. April 6, 2010). Willis did much more than sign a lien provision; he
“transferred $700,000.00 from his Merrill Lynch account to a non-IRA account held
with his wife, and then transferred the money to a third party in order to fund a real
property mortgage.” Id. at *1. Even though Willis had a favorable-determination letter
from the IRS, the court said, Willis’s transfer of funds from his IRA went beyond the
approved form of the account. Id. at *5. In marked contrast, other than signing the
papers to open the retirement account, Daley authorized no remotely comparable
transactions.

          In the final analysis, Mostoller has not rebutted the statutory presumption that
Daley’s retirement account is exempt from bankruptcy. Daley signed a boilerplate lien
provision as a requirement of opening an account that the IRS had approved. He made
no other transactions with the account, and because he opened no other accounts there
was no possibility that the lien would amount to anything. The agency with ultimate
authority to administer § 4975, the Department of Labor, has given no definitive
interpretation of § 4975 in this context. And the agency that shares enforcement
authority over § 4975, the IRS, has determined it will consider accounts like Daley’s
exempt. On this record, Daley did not use his retirement account to extend himself
credit.

                                            III.

          For these reasons, we reverse.
