In 2004, after giving “the full disclosure” to a skeptical examiner in the IRS National Office, she responded “well OK; but I still don’t like it.” and then proceeded to issue Favorable Determination Letters to three of our clients whose applications she was reviewing. With that attitude in mind, this is an area of tax law that one would be well advised to tread carefully. Do not be too clever. Observe the black and white letter of the law. Document every related transaction well. Do not give the IRS cause.
We fully disclose to the IRS each of our clients’ unique situation so that each will have reliance on their individual IRS Favorable Determination Letter. It is not the IRS favorable determination letter that the IRS would challenge, it is how closely you (the participant, the trustee, the employer) follow the IRS favorably determined plan. That is what it is — a plan. A plan to be followed. SDCooper Company ERSOP® Plans have fared very well during IRS audits. The audit activity culminated in a Memorandum (Memo) dated October 1, 2008. In the Memo the IRS Director stated, though the Rollover for Business Start-up (ROBS, the IRS term) plans were not non-compliant with the Internal Revenue Code “per se”, he did list areas of concern of these plans in operation. These were areas where we were concerned early on. With the publication of the Memo the IRS released pent-up “no change” audit letters to ERSOP® Plan clients. “No change” is a good thing.