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5b, or 5c. For purposes of 7, the

ongoing nature and will be treated as a

year in the taxable period. Multiply the

beneficial interest of the trust or estate

new prohibited transaction on the first

amount in column (d) by 15%.

is owned directly or indirectly, or held

day of each succeeding tax year or part

Example. The following example

by persons described in 1 through 5.

of a tax year that is within the taxable

of a prohibited transaction does not

8. An officer, director (or an

period.

cover all types of prohibited

individual having powers or

Line 25b, Column (b). List the date of

transactions. For more examples, see

responsibilities similar to those of

all prohibited transactions that took

Regulations section 53.4941(e)-1(b)(4).

officers or directors), a 10% or more

place in connection with a particular

A disqualified person borrows money

shareholder or highly compensated

plan during the current tax year. Also

from a plan in a prohibited transaction

employee (earning 10% or more of the

list the date of all prohibited

under section 4975. The FMV of the

yearly wages of an employer) of a

transactions that took place in prior

use of the money and the actual

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

years unless either the transaction was

interest on the loan is $1,000 per month

9. A 10% or more (in capital or

corrected in a prior tax year or the

(the actual interest is paid in this

profits) partner or joint venturer of a

section 4975(a) tax was assessed in

example). The loan was made on July

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

the prior tax year. A disqualified person

1, 2003, (date of transaction) and

10. Any disqualified person, as

who engages in a prohibited transaction

repaid on December 31, 2004 (date of

described in 1 through 9 above, who is

must file a separate Form 5330 to

correction). The disqualified person’s

a disqualified person with respect to

report the excise tax due under section

taxable year is the calendar year. On

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

4975 for each tax year.

July 31, 2005, the disqualified person

trust applies, is permitted to make

Line 25b, Columns (d) and (e). The

files a delinquent Form 5330 for the

payments under section 4223 of

“amount involved” in a prohibited

2003 plan year and a timely Form 5330

ERISA.

transaction means the greater of the

for the 2004 plan year. No Notice of

amount of money and the fair market

Prohibited transaction. A

Deficiency with respect to the tax

value (FMV) of the other property given,

“prohibited transaction” is any direct or

imposed by section 4975(a) has been

or the amount of money and the FMV

indirect:

mailed to the disqualified person and

of the other property received.

no assessment of such tax has been

1. Sale or exchange, or leasing of

However, for services described in

made before the time the disqualified

any property between a plan and a

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

person filed the Forms 5330.

disqualified person; or a transfer of real

amount involved only applies to excess

or personal property by a disqualified

When a loan is a prohibited

compensation. Fair market value must

person to a plan where the property is

transaction, the loan is treated as giving

be determined as of the date on which

subject to a mortgage or similar lien

rise to a prohibited transaction on the

the prohibited transaction occurs. If the

placed on the property by the

date the transaction occurs, and an

use of money or other property is

disqualified person within 10 years prior

additional prohibited transaction on the

involved, the amount involved is the

to the transfer, or the property

first day of each succeeding taxable

greater of the amount paid for the use

transferred is subject to a mortgage or

year (or portion of a taxable year) within

or the FMV of the use for the period for

similar lien which the plan assumes.

the taxable period that begins on the

which the money or other property is

2. Lending of money or other

date the loan occurs. Each prohibited

used. In addition, transactions involving

extension of credit between a plan and

transaction has its own separate

the use of money or other property will

a disqualified person.

taxable period which begins on the date

be treated as giving rise to a prohibited

3. Furnishing of goods, services, or

the prohibited transaction occurred or is

transaction occurring on the date of the

facilities between a plan and a

deemed to occur and ends on the date

actual transaction plus a new prohibited

disqualified person.

of the correction. The taxable period

transaction on the first day of each

4. Transfer to, or use by or for the

that begins on the date the loan occurs

succeeding tax year or portion of a

benefit of, a disqualified person of

runs from July 1, 2003, (date of loan)

succeeding tax year which is within the

income or assets of a plan.

through December 31, 2004 (date of

taxable period. The “taxable period ” is

5. Act by a disqualified person who

correction). Therefore, in this example,

the period of time beginning with the

is a fiduciary whereby he or she deals

there are two prohibited transactions,

date of the prohibited transaction and

with the income or assets of a plan in

the first occurring on July 1, 2003, and

ending with the earliest of:

his or her own interest or account.

the second occurring on January 1,

1. The date correction is completed,

6. Receipt of any consideration for

2004.

2. The date of the mailing of a

his or her own personal account by any

Section 4975(a) imposes a 15%

notice of deficiency, or

disqualified person who is a fiduciary

excise tax on the amount involved for

3. The date on which the tax under

from any party dealing with the plan

each taxable year or part thereof in the

section 4975(a) is assessed.

connected with a transaction involving

taxable period of each prohibited

the income or assets of the plan.

See the instruction for Additional tax for

transaction.

failure to correct the prohibited

The amount involved to be reported

Exemptions. See sections 4975(d),

transaction, under Part IV for the

on column (d) of Form 5330 filed for

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

definition of correction.

2003 is $6,000 (6 months × $1,000).

for specific exemptions to prohibited

The amount of tax due is $900 ($6,000

transactions. Also see section

Temporary Regulations section

×15%). (Any interest and penalties

4975(c)(2) for certain other transactions

141.4975-13 states that, until

imposed for the delinquent filing of the

or classes of transactions that may be

final regulations are written

CAUTION

Form 5330 for 2003 will be billed

exempt.

under section 4975(f), the definitions of

“amount involved” and “correction”

separately to the disqualified person.)

Line 25a. Check the box that best

found in Regulations section

characterizes the prohibited transaction

The taxable period for the second

53.4941(e)-1 will apply.

for which an excise tax is being paid. A

prohibited transaction runs from

prohibited transaction is discrete unless

Column (e). The initial tax on a

January 1, 2004, through December 31,

it is of an ongoing nature. Transactions

prohibited transaction is 15% of the

2004 (date of correction). Because

involving the use of money (loans, etc.)

amount involved in each prohibited

there are two prohibited transactions

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

transaction for each year or part of a

with taxable periods running during

-6-

Instructions For Form 5330 - Return Of Exange Taxes Related To Employee Benefit Plans Page 6

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