Instructions For Form 5330 - Internal Revenue Service (Page 7 of 13) in pdf

5b, or 5c of such entity. For purposes of

involving the use of money (loans, etc.)

Schedule C (Section 4975)

7, the beneficial interest of the trust or

or other property (rent, etc.) are of an

estate is owned directly or indirectly, or

ongoing nature and will be treated as a

Tax on Prohibited Transactions

held by persons described in 1 through

new prohibited transaction on the first

Section 4975 imposes an excise tax on

day of each succeeding tax year or part

a disqualified person that engages in a

8. An officer, director (or an

of a tax year that is within the taxable

prohibited transaction with the plan.

individual having powers or

period.

Plan. For purposes of prohibited

responsibilities similar to those of

Line 2, Column (b). List the date of all

transactions (section 4975), the term

officers or directors), a 10% or more

prohibited transactions that took place

plan means any of the following:

shareholder or highly compensated

in connection with a particular plan

•

A trust described in section 401(a)

employee (earning 10% or more of the

during the current tax year. Also list the

that forms part of a plan.

yearly wages of an employer) of a

date of all prohibited transactions that

•

A plan described in section 403(a),

person described in 3, 4, 5, or 7.

took place in prior years unless either

and that trust or plan is exempt from tax

9. A 10% or more (in capital or

the transaction was corrected in a prior

under section 501(a).

profits) partner or joint venturer of a

tax year or the section 4975(a) tax was

•

An individual retirement account

person described in 3, 4, 5, or 7.

assessed in the prior tax year. A

described in section 408(a).

10. Any disqualified person, as

disqualified person who engages in a

•

An individual retirement annuity

described in 1 through 9 above, who is

prohibited transaction must file a

described in section 408(b).

a disqualified person with respect to

separate Form 5330 to report the

•

An Archer MSA described in section

any plan to which a section 501(c)(22)

excise tax due under section 4975 for

220(d).

trust applies, that is permitted to make

each tax year.

•

A Coverdell education savings

payments under section 4223 of the

Line 2, Columns (d) and (e). The

account described in section 530.

Employee Retirement Income Security

•

A Health Savings Account described

amount involved in a prohibited

Act (ERISA).

in section 223(d).

transaction means the greater of the

•

A trust described in section

Prohibited transaction. A

amount of money and the fair market

prohibited transaction is any direct or

value (FMV) of the other property given,

501(c)(22).

indirect:

or the amount of money and the FMV

If the IRS determined at any

of the other property received.

1. Sale or exchange, or leasing of

time that your plan was a plan

However, for services described in

any property between a plan and a

as defined above, it will always

CAUTION

sections 4975(d)(2) and (10), the

disqualified person; or a transfer of real

remain subject to the excise tax on

amount involved only applies to excess

or personal property by a disqualified

prohibited transactions (section 4975).

compensation. For purposes of section

person to a plan where the property is

This also applies to the tax on minimum

4975(a), FMV must be determined as of

subject to a mortgage or similar lien

funding deficiencies (section 4971).

the date on which the prohibited

placed on the property by the

Disqualified person. A disqualified

transaction occurs. If the use of money

disqualified person within 10 years prior

person is any person who is:

or other property is involved, the

to the transfer, or the property

amount involved is the greater of the

1. A fiduciary.

transferred is subject to a mortgage or

amount paid for the use or the FMV of

2. A person providing services to

similar lien which the plan assumes.

the use for the period for which the

the plan.

2. Lending of money or other

money or other property is used. In

3. An employer, any of whose

extension of credit between a plan and

addition, transactions involving the use

employees are covered by the plan.

a disqualified person.

of money or other property will be

4. An employee organization, any of

3. Furnishing of goods, services, or

treated as giving rise to a prohibited

whose members are covered by the

facilities between a plan and a

transaction occurring on the date of the

plan.

disqualified person.

actual transaction plus a new prohibited

5. Any direct or indirect owner of

4. Transfer to, or use by or for the

transaction on the first day of each

benefit of, a disqualified person of

50% or more of:

succeeding tax year or portion of a

income or assets of a plan.

a. The combined voting power of all

succeeding tax year which is within the

5. Act by a disqualified person who

classes of stock entitled to vote, or the

taxable period. The taxable period is

is a fiduciary whereby he or she deals

total value of shares of all classes of

the period of time beginning with the

with the income or assets of a plan in

stock of a corporation,

date of the prohibited transaction and

his or her own interest or account.

b. The capital interest or the profits

ending with the earliest of:

6. Receipt of any consideration for

interest of a partnership,

his or her own personal account by any

1. The date the correction is

c. The beneficial interest of a trust

disqualified person who is a fiduciary

completed,

or unincorporated enterprise in a, b, or

from any party dealing with the plan

2. The date of the mailing of a

c, which is an employer or an employee

connected with a transaction involving

notice of deficiency, or

organization described in 3 or 4 above.

the income or assets of the plan.

3. The date on which the tax under

A limited liability company should be

section 4975(a) is assessed.

treated as a corporation, or a

Exemptions. See sections

partnership, depending on how the

See the instructions for Additional tax

4975(d), 4975(f)(6)(B)(ii), and

organization is treated for federal tax

for failure to correct the prohibited

4975(f)(6)(B)(iii) for specific exemptions

purposes.

transaction, under Schedule C for the

to prohibited transactions. Also see

6. A member of the family of any

definition of correction.

section 4975(c)(2) for certain other

individual described in 1, 2, 3, or 5. A

transactions or classes of transactions

member of a family is the spouse,

Temporary Regulations section

that may become exempt.

ancestor, lineal descendant, and any

141.4975-13 states that, until

spouse of a lineal descendant.

Line 1. Check the box that best

final regulations are written

CAUTION

7. A corporation, partnership, or

characterizes the prohibited transaction

under section 4975(f), the definitions of

trust or estate of which (or in which)

for which an excise tax is being paid. A

amount involved and correction found

any direct or indirect owner holds 50%

prohibited transaction is discrete unless

in Regulations section 53.4941(e)-1 will

or more of the interest described in 5a,

it is of an ongoing nature. Transactions

apply.

-7-

Instructions For Form 5330 - Internal Revenue Service Page 7

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