Using nonqualified deferred compensation to attract and keep employees.

A need exists for flexible compensation arrangements that can (1) provide performance incentives and aid in the retention of personnel without straining cash flow, (2) maximize retirement savings by using favorable tax rates to increase investment returns and (3) minimize the need for regulatory compliance. Nonqualified deferred compensation arrangements (DCAs) can meet these needs. Other reasons favoring their use include the following:

* The Sec. 401(a)(17) compensation limit for qualified plans has decreased from $235,840 to $150,000, lessening potential retirement savings. Under Section 13212 of the Revenue Reconciliation Act of 1993 (RRA '93), indexing of the $150,000 limit will not occur until 1996 and cannot exceed $10,000 per year. In contrast, DCAs are not subject to a stated compensation limit, and must meet only a standard of reasonable compensation.

* The marginal individual income tax rate is 39.6%, while the marginal corporate tax rate is 35%. Thus, while the corporation will be denied an immediate tax deduction for the deferred compensation, the individual tax savings from deferring the compensation will exceed the delayed corporate tax benefit. The marginal individual rate increases when adjusted to consider the phaseout of personal exemptions, limit on itemized deductions and RRA '93 Section 13207's repeal of the compensation cap for the medicare portion of FICA, resulting in an even greater tax benefit from the deferral.(1)

* DCAs are relatively free from regulation. Sections 3(36) and 4(b)(5) of the Employee Retirement Income Security Act of 1974 (ERISA) provide that unfunded excess benefit plans existing solely to provide benefits in excess of the Sec. 415 limits are exempt from ERISA requirements. Unfunded "top-hat" plans maintained for a select group of management or highly compensated employees are subject only to limited reporting and disclosure requirements and to ERISA enforcement.(2)

* The flexibility of DCAs provides unique planning opportunities. For instance, initial elections of method and time of payment can be modified later to meet changing needs and to provide for unforeseeable emergencies; investment vehicles can be chosen to provide performance incentives; participation can be restricted or canceled; and vesting schedules can be designed to encourage retention.

Nonqualified plans may be used with corporate directors as well as employees. DCAs may be particularly beneficial for closely held corporations in which family members are both directors and employees. In Jacobs,(3) a corporate director and president was denied a Keogh plan deferral for his director's fees because of the employment relationship. Except in partnerships, use of a DCA avoids this issue.(4)

An understanding of the deferral rules is critical to using DCAs effectively. This article provides a practical analysis of these rules, including recent rulings and court decisions, and discusses planning opportunities.

DCA Requirements

To maintain relative freedom from ERISA requirements, DCAs providing excess benefits or limiting coverage to a select group of management or highly compensated employees must be "unfunded," a term that is not defined. The ERISA Conference Report cited a phantom or shadow stock plan as an example of an unfunded plan.(5) The DOL has noted that because of the absence of regulations, it will give significant weight to positions adopted by the Service for Federal income tax purposes.(6) The IRS position, under Regs. Secs. 1.446-1(c)(1)(i) and 1.451-1(a), is that compensation for a cash-basis taxpayer becomes funded, and hence, taxable, when cash, property or services are actually or constructively received. Conversely, if compensation is not received, it is unfunded.

Actual and Constructive Receipt Doctrines

Actual receipt

"Receipt" occurs when a taxpayer gains unqualified control of cash, property or services.(7) According to Rev. Rul. 60-31,(8) "a mere promise to pay, not represented by notes or secured in any way," does not constitute receipt. However, according to the Fifth Circuit in Cowden,(9) if the promise to pay the taxpayer is unconditional and assignable, is not subject to set-offs and is of a kind frequently transferred to lenders or investors at a discount not substantially greater than the generally prevailing premium for the use of money, it is the equivalent of cash. This cash equivalent provides an economic benefit if the taxpayer actually receives property or a valuable future right, even if such property is not subject to the taxpayer's immediate control.(10) As shown in Sproull,(11) the greatest concern is the application of the economic benefit doctrine when a taxpayer receives a future right capable of current valuation.

In Sproull, an employer created a trust for the sole benefit of an employee or his beneficiary. The employee had no part in establishing the trust. The employer transferred a sum to the trust to be paid over the following two years in consideration for the employee's past services. Although the terms of the trust limited the employee's immediate access, the Tax Court held the employee was immediately taxable, because

--he was fully vested and had to do nothing further to earn the amount transferred;

--the only duties of the trustee were to invest, accumulate and pay over the trust income and principal to the employee or his beneficiary;

--no one, other than the employee, had an interest in or control over the trust assets; and

--the trust agreement contained no restriction on the employee's right to assign or dispose of his trust interest.

Sproull shows that the economic benefit doctrine extends to a DCA when there is a current beneficial interest in a future right to receive property. This interest may be valued if it is fully vested in the employee and secured against the employer's creditors.(12)

Constructive receipt

Alternatively, under Regs. Sec. 1.451-2(a), constructive receipt occurs when cash, property or services are "made available" without "substantial limitations or restrictions." According to Martin,(13) to be made available, an amount must be set apart, due and fully ascertainable. An amount is made available, for example, if a taxpayer may unilaterally demand payment of the amount in cash, property or services.(14) Under Regs. Sec. 1.451-2(a), however, if an employer merely credits funds to an employee on its books so that they are not available until a future date, the amount is neither set aside nor due. Under Martin, if the amount is based on profits and cannot be precisely determined until year-end, it is not fully ascertainable; further, under Rev. Rul. 60-31, a mere promise to pay that is not secured is not set apart. Finally, Martin provides that an amount is not due if it is subject to substantial restrictions or limitations.

In determining whether there are substantial limitations or restrictions, the courts look to whether a valuable right or privilege has been given up.(15) The following limitations or restrictions have been held to be sufficiently substantial to prevent application of the constructive receipt doctrine:

* Forfeiture of the right to receive employer contributions.(16)

* Forfeiture of the right to participate in a business's earnings.(17)

* Surrender of a life insurance policy.(18)

* Requirement that the employee die, retire or terminate service or receive employer consent before obtaining payment (even though the employer might be liberal in granting such consent).(19)

Constructive receipt is avoided only if the limitation or restriction applies to the availability of the deferred amount. Letter Ruling 9322011(20) addressed a situation in which an employee had to execute an agreement not to compete in order to participate in a DCA. Subsequently, the participant could choose either to receive an immediate cash award or to direct the employer to transfer the award to an irrevocable trust established by the employee. Under the trust's terms, once the award was transferred to it, access to it was deferred. The Service ruled that the agreement not to compete was a precondition to participation in the DCA. Once it was complied with, the employee could elect to receive a cash award; consequently, the precondition did not limit the availability of the deferred amount.

In applying the two-pronged test of constructive receipt, the taxpayer's right to receive income, not his power to receive it, controls. Consequently, the power of a controlling stockholder of a closely held corporation to receive income will not cause constructive receipt.(21)

Comparison of Economic Benefit and Constructive Receipt Doctrines

Compare the controlling factors of the economic benefit and constructive receipt doctrines:

Economic benefit           Constructive receipt
Determinable value      Fully ascertainable amount
Secured against
employer's creditors    Set apart
Fully vested            No substantial limitations
                        or restrictions
        --              Due

Three of the four factors are expressed differently, but actually operate similarly. The fourth factor, "Due," is controlling for constructive receipt purposes, but not for determining applicability of the economic benefit doctrine. Consequently, a deferral election made prior to the time an amount is due may be taxed under the economic benefit doctrine, rather than under the constructive receipt doctrine. This is significant, because Rev. Procs. 71-19(22) and 92-65,(23) reflecting the Service's advance ruling position on DCAs, only address constructive receipt. This is not an oversight. Companion Rev. Proc. 92-64,(24) which provides model rabbi trust language, states that no inference may be drawn by reason of adoption of the model trust concerning constructive receipt or economic benefit issues that may be present in the underlying DCA (rabbi trusts are discussed below). However, a request for a ruling under Rev. Proc. 92-65 will be helpful because of the overlapping factors used in determining constructive receipt and economic benefit.

The guidelines in Rev. Proc. 92-65 provide that the following three provisions must appear in a rabbi trust to obtain a ruling on the applicability of constructive receipt:

1. Participants have the status of unsecured creditors.

2. The plan constitutes a mere promise by the employer to make benefit payments in the future.

3. A participant's payments are not subject to anticipation, alienation, sale, transfer, assignment or garnishment by creditors of the participant or the participant's beneficiaries.

Following these guidelines should also provide substantial evidence that no current beneficial interest was received and, consequently, that the economic benefit doctrine does not apply.

Making the Deferral Election

Timing is critical when electing to defer compensation; the election should be made before an amount is due by having the employee enter into a legally binding deferral contract before the employee has acquired an absolute and unconditional right to receive payments.(25) Under Rev. Proc. 92-65, the employee must initially elect to defer compensation before one of the following:

* The beginning of the period of service for which the compensation is payable (generally, the beginning of the employee's tax year).

* Within 30 days after the date the plan is effective for eligible employees.

* Within 30 days after the employee first becomes eligible.

If these guidelines are not followed, the employer will be unable to obtain an advance ruling and the employee must be able to show, on audit, that the compensation was not due when the election was made.

Subsequent elections

Rev. Proc. 92-65 requires that a DCA define the time and method of payments; it may also include payment provisions in the event of an unforeseeable emergency. Yet, it does not require that an employee make an irrevocable choice among the provided timing and payment alternatives. Consequently, if the plan provides a choice, an employee can make a subsequent election to modify an initial selection. In addition, Rev. Proc. 71-19 requires that, if the employee can make an election other than the initial election to defer compensation, the DCA must contain substantial risk of forfeiture provisions that remain in effect for the entire period of the deferral.

The Tax Court, however, is more liberal than is the Service's advance ruling position. If the deferred compensation is not due at the time the subsequent election is made, the election does not trigger taxation, regardless of whether the amount due has been ascertained.(26)

In Martin, participants in a corporation's deferred compensation plan were originally supposed to receive payments in installments. A new plan was substituted that provided for shadow stock to participants, which had to be surrendered to obtain, at the participant's election, a lumpsum or installment payments. The Service contended that the availability of a lump-sum payment resulted in constructive receipt, but the Tax Court disagreed.

The court found that constructive receipt did not occur, because a participant had to give up shadow stock to receive payments. At the time of the election of a lumpsum or installment payments, the deferred compensation amount was neither due nor ascertainable, payment was subject to substantial limitations and restrictions, and funds had not been set apart.

Martin is significant for planning purposes; it increases flexibility by permitting elections to be made by the employee after performance begins that affect the time and method of payment. The election will be effective if substantial limitations and restrictions exist such that benefits will not be due when the subsequent election is made. To comply with Rev. Proc. 92-65, the DCA should state alternatives as to the time and method of payment; the election from these alternatives should be finalized while substantial restrictions and limitations exist and before deferred compensation is paid.

Anticipatory assignment of income

A deferral election should not raise the issue of anticipatory assignment of income unless such income either has been constructively or actually received through an economic benefit. If the DCA provides that the employer will pay the employee a death or disability benefit (whether or not funded), it is a current economic benefit deemed received immediately.(27) Even if such benefits are provided only if the employee so elects, the choice alone results in an anticipatory assignment of income.(28)

DCAs present unique opportunities for anticipatory assignment issues to arise. An assignment of deferred compensation may reflect control by the employee over an amount available. The deferral ends if assignment is made either in the form of an improper election to defer or an actual payment to an assignee of the employee. For instance:

* Amounts paid under a divorce decree from a nonqualified plan to a participant's former spouse were taxed to the participant as an anticipatory assignment of income.(29)

* An assignment of renewal commissions to a corporate trustee after they were earned but before they were due was taxable to the assignor as collected by the corporate trustee as an anticipatory assignment of income.(30)

* An election either to receive a current payment of cash or have the cash paid to an irrevocable trust established by the employee was an anticipatory assignment of income.(31)

When planning with DCAs, caution must be exercised in making elections and assignments to avoid termination of the deferral; when the deferral ends, the employee will be taxed.

Investment of Deferred Compensation

A provision for investment is needed in a DCA to eliminate the effects of inflation. Either real investments or "deemed" investments (e.g., bonds, mutual funds, shadow employer stock) may be used. To avoid funding the DCA when real investments are used, such investments should be made subject to the claims of the employer's general creditors.(32)

Sec. 83

Under Sec. 83(a), "property" transferred as compensation for services is taxed when the property is either freely transferable or not subject to a substantial risk of forfeiture. Under Regs. Sec. 1.83-3(e), an employer's unsecured and unfunded promise to pay deferred compensation in the future is not "property"; however, the term does include a beneficial interest in assets set aside in a trust that is not subject to the claims of the employer's general creditors. Thus, the employer should avoid funding the DCA; a rabbi trust can provide a funding vehicle without creating a transfer of property subject to Sec. 83.

Rabbi trusts

A rabbi trust with an independent third-party trustee provides assurance to the participant that assets will be set aside to fund the DCA, employer control over such assets will be minimized, the employer's general creditors will have access to the trust assets in the case of insolvency or bankruptcy, and that payments will be made to the participant on a triggering event (e.g., death, termination, disability). However, as a grantor trust of the employer, a rabbi trust will not be treated as funding the DCA and will not create taxable income for the employee.(33) Access to the rabbi trust's assets by the employer's general creditors when the employer is insolvent has been sustained by the courts.(34)

If a rabbi trust is used in a DCA, the Service, except in rare and unusual circumstances, will issue a letter ruling only if the provisions of both Rev. Proc. 92-64 (model trust language) and Rev. Proc. 92-65 (guidelines for a DCA) have been followed. A rare and unusual circumstance occurred in Letter Ruling 9332038.(35) There, a DCA substantially adopted the model trust language of Rev. Proc. 92-64, but not the model trust format. The variance in the rabbi trust was necessary because the participant was a U.S. citizen employed by a Canadian sports franchise, and the DCA had to comply with both U.S. and Canadian tax law. Thus, the rare and unusual circumstances exception may be of limited utility.

Investment interest

Any real earnings attributable to investments of deferred compensation will be taxable to the employer. If interest is charged to the employer for use of the funds, it will not be deductible; it is treated as part of the compensation.(36)

Because the Tax Court has considered the lack of an accrual of interest on deferred compensation to be an indication that neither economic benefit nor constructive receipt has occurred,(37) accrual should occur only if the payment of interest is subject to substantial limitations and restrictions. Or, other methods of providing an investment return for deferred compensation that provide a performance incentive for the employee (e.g., deemed dividends, profit sharing, percentage of new business obtained, shadow or phantom stock) should be considered.

The use of employee-directed investments provides participants with some control over their investment return. Letter Ruling 8507028(38) held that establishing a separate deferred account for each employee, to be credited with "deemed investment" gains, losses and earnings, did not make property available to an employee, even though the employee could select the mode of the deemed investment (e.g., certificates of deposit or a particular corporation's stock).

The Service has also permitted an actual investment in employer stock by a rabbi trust,(39) but affiliated companies using the same trust should carefully draft their agreement to clarify any corporate tax consequences. In Letter Ruling 9235006,(40) the Service permitted affiliated corporations to contribute to the same rabbi trust under a DCA that invested exclusively in the parent's common stock.

Use of shadow stock by closely held corporations

Shadow stock of the employer corporation is often used as an investment vehicle to provide an employee with the financial benefits of ownership without actual ownership. However, it should not be used if the participating individual has a substantial ownership interest in or control over the corporation.(41) While the Service has recognized the separate tax identities of a stockholder and his corporation,(42) it is likely to contend that any such DCA is a sham.

Payroll tax planning

Payroll taxes may be due on investment earnings if the investment return is characterized as additional compensation. Characterization in this regard may be uncertain; while Albertson's, Inc.(43) held that accrued interest is not deductible, the Ninth Circuit did not characterize the earnings and the Tax Court was split on the issue.

The Service indicated in Notice 94-96(44) that it will issue proposed regulations on the FICA taxation of nonqualified deferred compensation. However, careful structuring of the DCA may lead to characterization of the investment earnings as either compensation subject to payroll taxes or as investment return. In Milligan,(45) the Ninth Circuit held that payments to a retired insurance agent were not derived from his prior business and so were not subject to self-employment (SE) tax. The court held that the payments had to be tied to either the quantity or quality of the tax-payer's prior labor for SE tax to apply. The method of calculating the investment earnings may determine whether such earnings are treated as additional compensation.

Guarantees and Escrows

Third-party guarantees

To provide additional security for the employee, third-party guarantees can be used. If the guarantee is not assignable and is not of a kind generally transferred to lenders or investors at a discount, there should not be immediate taxation of deferred compensation. The Service has permitted such guarantees when made by a parent corporation,(46) and Berry(47) permitted a team owner to guarantee a player's deferred compensation.

Escrow

While a third-party guarantee is permissible, escrow arrangements, unless drafted similarly to a rabbi trust, will cause the discounted value of the deferred compensation to be immediately taxable.(48) However, if the escrow agreement is the result of an arm's-length negotiation between the employer and employee before the compensable services are rendered, an independent escrow agent is used and the employee receives no present, beneficial interest from the escrow, there should be no immediate tax consequences.(49) In Reed,(50) the First Circuit held that stock sale proceeds held in such an escrow were not currently taxable. However, when deferred compensation is the subject of the escrow, the economic benefit doctrine will trigger taxability when funds are transferred by the employer to the escrow, unless the employer retains control over the funds or the employer's creditors retain an interest.(51)

Conclusion

Although DCAs are unfunded, they can provide valuable performance incentives for a select group of employees. Guidelines for implementing DCAs include the following:

* The investment returns on the deferred compensation should be structured to reward key employees who influence the realization of profit goals.

* Vesting should be delayed to encourage employees to remain with the employer.

* Self-directed investments provide the employee with greater control.

* Employees should be permitted to alter their initial elections as to time and method of payments to reflect their changing needs.

* Use of the model rabbi trust language or third-party guarantees will provide security for the participant. If the third party is a related party or the rabbi trust is funded with employer stock, cash flow will not be jeopardized.

While these flexible arrangements are relatively free of regulation, their use requires the adviser to understand the economic benefit and constructive receipt doctrines to avoid current taxation. Once understood, DCAs can be designed to benefit both the employer and the employee.

(1)Under Sec. 3121(v)(2)(A) and Regs. Sec. 31.3121(a)-2, deferral of compensation delays FICA taxes only if the deferral is subject to a substantial risk of forfeiture; otherwise, FICA taxes must be paid in the year the compensation is earned.

(2)ERISA Sections 110, 201(2), 301(a)(3) and 401(a)(1); Department of Labor (DOL) Regs. Section 2520.104-23(a). DOL Opinion Letter 90-14A (5/8/90) clarified that DOL Regs. Section 2510.3-102 was not intended to abolish voluntary compensation deferrals by executives.

(3)Peter H. Jacobs, TC Memo 1993-570.

(4)See Harry S. Stonehill, TC Memo 1987-405 (partner taxed on distributive share and existence of actual or constructive receipt was irrelevant).

(5)H. Rep. No. 93-1280, 93d Cong., 2d Sess. 296 (1974), 1974-3 CB 457.

(6)DOL Opinion Letter 90-14A, note 2. DOL Regs. Section 2550.401b-1, promulgated in 1982 to describe what constitutes plan assets for ERISA purposes, did not define "unfunded" and was removed in 1986.

(7)See Corliss v. Bowers, 281 US 376, 378 (1930)(8 AFTR 10910, 2 USTC [paragraph]525).

(8)Rev. Rul. 60-31, 1960-1 CB 174.

(9)Frank Cowden, Sr., 289 F2d 20 (5th Cir. 1961)(7 AFTR2d 1160, 61-1 USTC [paragraph]9382), on remand, TC Memo 1961-229.

(10)Ralph H. Minor, 772 F2d 1472 (9th Cir. 1985)(56 AFTR2d 85-6037, 85-2 USTC [paragraph]9717); John E. Reed, 723 F2d 138 (1st Cir. 1983)(53 AFTR2d 84-335, 83-2 USTC [paragraph]9728), rev'g TC Memo 1982-734; Douglas M. Goldsmith, 586 F2d 810 (Ct. Cl. 1978)(42 AFTR2d 78-6203, 78-2 USTC [paragraph]9804); E.T. Sproull, 16 TC 244 (1951), aff'd, 194 F2d 541 (6th Cir. 1952)(41 AFTR 849, 52-1 USTC [paragraph]9223); Rev. Rul. 67-203, 1967-1 CB 105.

(11)Sproull, id.

(12)Minor, note 10.

(13)George C. Martin, 96 TC 814 (1991).

(14)Young Door Co., Eastern Division, 40 TC 890 (1963).

(15)See, e.g., Henry L. Blum v. Higgins, 150 F2d 471 (2d Cir. 1945)(34 AFTR 24, 45-2 USTC [paragraph]9343).

(16)Dillis C. Knapp, 41 BTA 23 (1940).

(17)Est. of W.T. Hales, 40 BTA 1245 (1939).

(18)Florence H. Griffith, 35 TC 882 (1961).

(19)Joseph S. Metcalfe, TC Memo 1982-273.

(20)IRS Letter Ruling 9322011 (3/5/93).

(21)Young Door Co., note 14.

(22)Rev. Proc. 71-19, 1971-1 CB 698.

(23)Rev. Proc. 92-65, 1992-2 CB 428.

(24)Rev. Proc. 92-64, 1992-2 CB 422.

(25)See Donald Oliver, 193 F Supp 930 (E.D. Ark. 1961)(8 AFTR2d 5379, 61-2 USTC [paragraph]9619); Goldsmith, note 10; Ray S. Robinson, 44 TC 20 (1965), acq. 1970-2 CB xxi; Rev. Rul. 70-435, 1970-2 CB 100; James F. Oates, 18 TC 570 (1952), aff'd, 207 F2d 711 (7th Cir. 1953)(44 AFTR 535, 53-2 USTC [paragraph]9596), acq. 1960-1 CB 5.

(26)Oates, id.; Howard Veit, 8 TCM 919 (1949), and 8 TC 809 (1947), acq. 1947-2 CB 4.

(27)Goldsmith, note 10.

(28)IRS Letter Ruling (TAM) 9406002 (10/27/93).

(29)IRS Letter Ruling 9340032 (7/6/93). Qualified domestic relations orders only cover distributions from qualified plans.

(30)Gerald A. Eubank, 311 US 122 (1940)(24 AFTR 1063, 40-2 USTC [paragraph]9788).

(31)IRS Letter Ruling 9243034 (7/24/92).

(32)Rev. Proc. 92-64, note 24; Rev. Ruls. 72-25, 1972-1 CB 127, and 60-31, note 8.

(33)See Rev. Rul. 60-31, note 8.

(34)See, e.g., Goodman v. Resolution Trust Corp., 7 F3d 1123 (4th Cir. 1993).

(35)IRS Letter Ruling 9332038 (5/18/93).

(36)See Albertson's, Inc., 95 TC 415 (1990), rev'd, 12 F3d 1529 (9th Cir. 1993)(73 AFTR2d 94-558, 94-1 USTC [paragraph]50,016), reh'g granted, 38 F3d 1046 (9th Cir. 1993)(73 AFTR2d 94-1721, 94-1 USTC [paragraph]50,016), vac'd and aff'd in part, 42 F3d 537 (9th Cir. 1994)(74 AFTR2d 94-7072, 94-2 USTC [paragraph]50,619) (interest on deferred compensation is not deductible).

(37)Martin, note 13; Kaw Dehydrating Co. Inc., 74 TC 370 (1980).

(38)IRS Letter Ruling 8507028 (11/20/84).

(39)See Rev. Proc. 92-64, note 24.

(40)IRS Letter Ruling 9235006 (12/4/91); IRS Letter Ruling 9404008 (5/7/93) proposed partial revocation of that ruling, because its characterization of the parent corporation as the trust's sole grantor and owner was incorrect; consequently, the favorable treatment under Sec. 1032 for the stock sale and the treatment of dividends paid on the parent's stock might also be incorrect. No inference should be drawn from the proposed revocation as to the permissibility of funding a rabbi trust with employer stock.

(41)According to Martin, note 13, at 825, n. 5, it is "probably more suspicious for employees with substantial equity and control to be receiving shadow stock benefits which are intended to permit key employees to share in profits without investing and risking their capital."

(42)See Oreste Casale, 247 F2d 440 (2d Cir. 1957)(52 AFTR 122, 57-2 USTC [paragraph]9920).

(43)Albertson's, Inc., note 36.

(44)Notice 94-96, IRB 1994-46, 10.

(45)Robert E. Milligan, 38 F3d 1094 (9th Cir. 1994)(74 AFTR2d 94-6714, 94-2 USTC [paragraph]50,565), rev'g TC Memo 1992-655.

(46)IRS Letter Rulings 8906022 (11/10/88) (guarantee by employer's parent of contributions to rabbi trust); 8752037 (9/29/87) (guarantee by holding company purchasing employer's stock); 8751020 (9/21/87) (parent corporation assumed liabilities in a reorganization in which it acquired employer's assets); 8741078 (7/17/87) (irrevocable guarantee by employer's parent).

(47)M. Douglas Berry, 593 F Supp 80 (M.D. N.C. 1984)(54 AFTR2d 84-5722, 84-2 USTC [paragraph]9646), aff'd, 760 F2d 85 (4th Cir. 1985).

(48)Rev. Ruls. 62-74, 1962-1 CB 68, and 60-31, note 8, at Example 4.

(49)See Rev. Procs. 92-65, note 23, and 92-64, note 24.

(50)Reed, note 10.

(51)Sproull, note 10; Rev. Rul. 69-50, 1969-1 CB 140.