§133 — Repealed. Pub. L. 104–188, title I, § 1602(a), Aug. 20, 1996, 110 Stat. 1833]
9 citing cases
Statute Text — 26 U.S.C. §133
[§ 133. Repealed. Pub. L. 104–188, title I, § 1602(a), Aug. 20, 1996, 110 Stat. 1833] Section, added Pub. L. 98–369, div. A, title V, § 543(a), July 18, 1984, 98 Stat. 891; amended Pub. L. 99–514, title XI, § 1173(b)(1)(A), (2), title XVIII, § 1854(c)(2)(A), (C), (D), Oct. 22, 1986, 100 Stat. 2515, 2879; Pub. L. 100–647, title I, § 1011B(h)(1), (2), Nov. 10, 1988, 102 Stat. 3490; Pub. L. 101–239, title VII, § 7301(a)–(c), Dec. 19, 1989, 103 Stat. 2346, 2347, prior to repeal, read as follows: § 133. Interest on certain loans used to acquire employer securities (a) In general Gross income does not include 50 percent of the interest received by— (1) a bank (within the meaning of section 581), (2) an insurance company to which subchapter L applies, (3) a corporation actively engaged in the business of lending money, or (4) a regulated investment company (as defined in section 851), with respect to a securities acquisition loan. (b) Securities acquisition loan (1) In general For purposes of this section, the term “securities acquisition loan” means— (A) any loan to a corporation or to an employee stock ownership plan to the extent that the proceeds are used to acquire employer securities for the plan, or (B) any loan to a corporation to the extent that, within 30 days, employer securities are transferred to the plan in an amount equal to the proceeds of such loan and such securities are allocable to accounts of plan participants within 1 year of the date of such loan. For purposes of this paragraph, the term “employer securities” has the meaning given such term by section 409(l). The term “securities acquisition loan” shall not include a loan with a term greater than 15 years. (2) Loans between related persons The term “securities acquisition loan” shall not include— (A) any loan made between corporations which are members of the same controlled group of corporations, or (B) any loan made between an employee stock ownership plan and any person that is— (i) the employer of any employees who are covered by the plan; or (ii) a member of a controlled group of corporations which includes such employer. For purposes of this paragraph, subparagraphs (A) and (B) shall not apply to any loan which, but for such subparagraphs, would be a securities acquisition loan if such loan was not originated by the employer of any employees who are covered by the plan or by any member of the controlled group of corporations which includes such employer, except that this section shall not apply to any interest received on such loan during such time as such loan is held by such employer (or any member of such controlled group). (3) Terms applicable to certain securities acquisition loans A loan to a corporation shall not fail to be treated as a securities acquisition loan merely because the proceeds of such loan are lent to an employee stock ownership plan sponsored by such corporation (or by any member of the controlled group of corporations which includes such corporation) if such loan includes— (A) repayment terms which are substantially similar to the terms of the loan of such corporation from a lender described in subsection (a), or (B) repayment terms providing for more rapid repayment of principal or interest on such loan, but only if allocations under the plan attributable to such repayment do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). (4) Controlled group of corporations For purposes of this paragraph, the term “controlled group of corporations” has the meaning given such term by section 409(l)(4). (5) Treatment of refinancings The term “securities acquisition loan” shall include any loan which— (A) is (or is part of a series of loans) used to refinance a loan described in subparagraph (A) or (B) of paragraph (1), and (B) meets the requirements of paragraphs (2) and (3). (6) Plan must hold more than 50 percent of stock after acquisition or transfer (A) In general A loan shall not be treated as a securities acquisition loan for purposes of this section unless, immediately after the acquisition or transfer referred to in subparagraph (A) or (B) of paragraph (1), respectively, the employee stock ownership plan owns more than 50 percent of— (i) each class of outstanding stock of the corporation issuing the employer securities, or (ii) the total value of all outstanding stock of the corporation. (B) Failure to retain minimum stock interest (i) In general Subsection (a) shall not apply to any interest received with respect to a securities acquisition loan which is allocable to any period during which the employee stock ownership plan does not own stock meeting the requirements of subparagraph (A). (ii) Exception To the extent provided by the Secretary, clause (i) shall not apply to any period if, within 90 days of the first date on which the failure occurred (or such longer period not in excess of 180 days as the Secretary may prescribe), the plan acquires stock which results in its meeting the requirements of subparagraph (A). (C) Stock For purposes of subparagraph (A)— (i) In general The term “stock” means stock other than stock described in section 1504(a)(4). (ii) Treatment of certain rights The Secretary may provide that warrants, options, contracts to acquire stock, convertible debt interests and other similar interests be treated as stock for 1 or more purposes under subparagraph (A). (D) Aggregation rule For purposes of determining whether the requirements of subparagraph (A) are met, an employee stock ownership plan shall be treated as owning stock in the corporation issuing the employer securities which is held by any other employee stock ownership plan which is maintained by— (i) the employer maintaining the plan, or (ii) any member of a controlled group of corporations (within the meaning of section 409(l)(4)) of which the employer described in clause (i) is a member. (7) Voting rights of employer securities A loan shall not be treated as a securities acquisition loan for purposes of this section unless— (A) the employee stock ownership plan meets the requirements of section 409(e)(2) with respect to all employer securities acquired by, or transferred to, the plan in connection with such loan (without regard to whether or not the employer has a registration-type class of securities), and (B) no stock described in section 409(l)(3) is acquired by, or transferred to, the plan in connection with such loan unless— (i) such stock has voting rights equivalent to the stock to which it may be converted, and (ii) the requirements of subparagraph (A) are met with respect to such voting rights. (c) Employee stock ownership plan For purposes of this section, the term “employee stock ownership plan” has the meaning given to such term by section 4975(e)(7). (d) Application with section 483 and original issue discount rules In applying section 483 and subpart A of part V of subchapter P to any obligation to which this section applies, appropriate adjustments shall be made to the applicable Federal rate to take into account the exclusion under subsection (a). (e) Period to which interest exclusion applies (1) In general In the case of— (A) an original securities acquisition loan, and (B) any securities acquisition loan (or series of such loans) used to refinance the original securities acquisition loan, subsection (a) shall apply only to interest accruing during the excludable period with respect to the original securities acquisition loan. (2) Excludable period For purposes of this subsection, the term “excludable period” means, with respect to any original securities acquisition loan— (A) In general The 7-year period beginning on the date of such loan. (B) Loans described in subsection (b)(1)(A) If the term of an original securities acquisition loan described in subsection (b)(1)(A) is greater than 7 years, the term of such loan. This subparagraph shall not apply to a loan described in subsection (b)(3)(B). (3) Original securities acquisition loan For the purposes of this subsection, the term “original securities acquisition loan” means a securities acquisition loan described in subparagraph (A) or (B) of subsection (b)(1). Editorial Notes Prior ProvisionsA prior section 133 was renumbered section 140 of this title. Statutory Notes and Related Subsidiaries Effective Date of RepealPub. L. 104–188, title I, § 1602(c), Aug. 20, 1996, 110 Stat. 1834, provided that: “(1) In general.—The amendments made by this section [amending sections 291, 812, 852, 4978, 6047, and 7872 of this title and repealing this section and section 4978B of this title] shall apply to loans made after the date of the enactment of this Act [Aug. 20, 1996]. “(2) Refinancings.—The amendments made by this section shall not apply to loans made after the date of the enactment of this Act to refinance securities acquisition loans (determined without regard to section 133(b)(1)(B) of the Internal Revenue Code of 1986, as in effect on the day before the date of the enactment of this Act) [set out above] made on or before such date or to refinance loans described in this paragraph if—“(A) the refinancing loans meet the requirements of section 133 of such Code (as so in effect), “(B) immediately after the refinancing the principal amount of the loan resulting from the refinancing does not exceed the principal amount of the refinanced loan (immediately before the refinancing), and “(C) the term of such refinancing loan does not extend beyond the last day of the term of the original securities acquisition loan. For purposes of this paragraph, the term ‘securities acquisition loan’ includes a loan from a corporation to an employee stock ownership plan described in section 133(b)(3) of such Code (as so in effect). “(3) Exception.—Any loan made pursuant to a binding written contract in effect before June 10, 1996, and at all times thereafter before such loan is made, shall be treated for purposes of paragraphs (1) and (2) as a loan made on or before the date of the enactment of this Act.”
Treasury Regulations
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Treas. Reg. §1.133-1TQuestions and answers relating to interest on certain loans used to acquire employer securities
Q-1: What does section 133 provide?
A-1: In general, section 133 provides that certain commercial lenders may exclude from gross income fifty percent of the interest received with respect to securities acquisition loans. A securities acquisition loan is any loan to an employee stock ownership plan (ESOP) (as defined in section 4975(e)(7)) that qualifies as an exempt loan under §§ 54.4975-7 and -11 to the extent that the proceeds are used to acquire employer securities (within the meaning of section 409(l)) for the ESOP. A loan made to a corporation sponsoring an ESOP (or to a person related to such corporation under section 133(b)(2)) may also qualify as a securities acquisition loan to the extent and for the period that the proceeds are (a) loaned to the corporation's ESOP under a loan that qualifies as an exempt loan under §§ 54.4975-7 and -11 and that has substantially similar terms as the loan from the commercial lender to the sponsoring corporation, and (b) used to acquire employer securities for the ESOP. The terms of the loan between the commercial lender and the sponsoring corporation (or a related corporation) and the loan between such corporation and the ESOP shall be treated as substantially similar only if the timing and rate at which employer securities would be released from encumbrance if the loan from the commercial lender were the exempt loan under the applicable rule of § 54.4975-7(b)(8) are substantially similar to the timing and rate at which employer securities will actually be released from encumbrance in accordance with such rule. For this purpose, if the loan from the commercial lender to the sponsoring corporation states a variable rate of interest and the loan between the corporation and the ESOP states a fixed rate of interest, whether the terms of the loans are substantially similar shall be determined at the time the obligations are initially issued by taking into account the adjustment interval on the variable rate loan and the maturity of the fixed rate loan. For example, if the rate on the loan from the commercial lender to the sponsoring corporation adjusts each six months and the loan from the corporation to the ESOP has a ten year term, the initial interest rate on the variable rate loan could be compared to the rate on the fixed rate loan by comparing the yields on 6 month and ten year Treasury obligations. Similarly, if the rates on the two loans are based on different compounding assumptions, whether the terms of the loans are substantially similar shall be determined by taking into account the different compounding assumptions. A securities acquisition loan may be evidenced by any note, bond, debenture, or certificate. Also, section 133(b)(2) provides that certain loans between related persons are not securities acquisition loans. In addition, a loan from a commercial lender to an ESOP or sponsoring corporation to purchase employer securities will not be treated as a securities acquisition loan to the extent that such loan is used, either directly or indirectly, to purchase employer securities from any other qualified plan, including any other ESOP, maintained by the employer or any other corporation which is a member of the same controlled group (as defined in section 409(l)(4)).
Q-2: What lenders are eligible to receive the fifty percent interest exclusion?
A-2: Under section 133(a), a bank (within the meaning of section 581), an insurance company to which subchapter L applies, or a corporation (other than a subchapter S corporation) actively engaged in the business of lending money may exclude from gross income fifty percent of the interest received with respect to a securities acquisition loan (as defined in Q&A-1 of § 1.133-1T). For purposes of section 133(a)(3), a corporation is actively engaged in the business of lending money if it lends money to the public on a regular and continuing basis (other than in connection with the purchase by the public of goods and services from the lender or a related party). A corporation is not actively engaged in the business of lending money if a predominant share of the original value of the loans it makes to unrelated parties (other than in connection with the purchase by the public of goods and services from the lender or a related party) are securities acquisition loans.
Q-3: May loans which qualify for the fifty percent interest exclusion under section 133 be syndicated to other lending institutions?
A-3: Securities acquisition loans under section 133 may be syndicated to other lending institutions provided that such lending institutions are described in section 133(a) (1), (2) or (3) and the loan was originated by a qualified holder. Subsequent holders of the debt instrument may qualify for the partial interest exclusion of section 133 if such holders satisfy the requirements of section 133 and such loan does not fail to be a securities acquisition loan under section 133(b)(2).
Q-4: When is section 133 effective?
A-4: Section 133 applies to securities acquisition loans made after July 18, 1984, and used to acquire employer securities after July 18, 1984. The provision does not apply to loans made after July 18, 1984, to the extent that such loans are renegotiations, directly or indirectly, of loans outstanding on such date. A loan extended to an ESOP or sponsoring corporation after July 18, 1984, will be treated as a renegotiation of an outstanding loan if the loan proceeds are used to refinance acquisitions of employer securities made prior to July 19, 1984. For example, if an ESOP borrowed money prior to July 19, 1984, to purchase employer securities and after July 18, 1984, borrows other funds from the same or a different commercial lender to repay the first loan, the second loan will be treated as a renegotiation of an outstanding loan to the extent of the repaid amount. Similarly, if, after July 18, 1984, an ESOP sells employer securities, uses the proceeds to retire a pre-July 19, 1984, loan and obtains a second loan to acquire replacement employer securities, the second loan will be treated as a renegotiation of an outstanding loan.
9 Citing Cases
And Tax Court decisions, like Federal District Court decisions, are appealable to the U.S. Courts of Appeals. Sec. 7482(a)(1); see 28 U.S.C. sec. 1291 (2018). In light of these similarities, the U.S. Supreme Court has characterized this Court’s “role in the federal judicial scheme [as] closely resembl[ing] those of the federal dist
The IRS contendedthat petitioners were not engaged in the horse activity for profit within - 6 - the meaning ofsection 133 Petitioners requested review by the IRS Office of Appeals, and the IRS event ally conceded the section 183 issue.
133.044 (2005). The parties introduced good maps of the property, which show it to be quadrilateral--but it's not a rectangle, and there's nothing in the record describing the angles involved, making areal calculations of parts of the property necessarily imprecise. We also round to the nearest whole number here and throughout our calculations