Rev. Rul. 72-4

Revenue Ruling 55-81, C.B. 1955-1, 392, holds that where a pension plan meets all other requirements of section 165(a) of the Internal Revenue Code of 1939 (Section 401(a) of the Internal Revenue Code of 1954), the mere fact that it covers, at a particular time, only the employer's one employee will not, for that reason alone, cause the plan to fail of qualification under that section.

The principle set out in Revenue Ruling 55-81 is that where a plan covering only one employee at a particular time is not designed or operated as a means of siphoning profits to a shareholder employee, or otherwise limiting participation to an employee within the enumeration with respect to which discrimination is prohibited, it may satisfy the requirement that it be for the exclusive benefit of employees in general. This principle is equally applicable to a pension plan established by an employer dealing exclusively in the services of its sole employee who is also a shareholder.

Held, a pension plan that otherwise meets all of the applicable requirements for qualification under section 401(a) of the Code will not fail of qualification merely because it is established by an employer operated for the purpose of selling the services, abilities, or talents of its only employee who is also its principal or sole shareholder.

Whether a principal or sole shareholder of a corporation is an employee of the corporation and whether the corporation is engaged in the business of selling the services, abilities, or talents of this individual depend upon the actual facts and circumstances. See Jerome J. Roubik v. Commissioner, 53 T.C. 365 (1969).

Revenue Ruling 55-81 is hereby amplified.