Defendant counters that the Internal Revenue Code states that contributions are irrevocable so long as they cannot be diverted "to a use other than for the exclusive benefit of the employees." (Reply 7 (quoting Cmty. Servs., Inc. v. United States, 422 F.2d 1353, 1359 (Ct. Cl. 1970)).) Defendant contends that its PSP incorporates by reference section 401(a) of the Revenue Code and when a plan incorporates said section by reference it "conclusively establishes that it would [be] a violation of the contract for [the employer], at anytime, to have diverted the trust funds to its own use."
In petitioner's view, this Court should not demand compliance with the statutory language but rather should balance what petitioner deems the minimal harm caused by a defective plan provision never brought into operation against the harm to plan participants resulting from a holding that the plan is not qualified. In support of this argument, petitioner cites Time Oil Co. v. Commissioner, 258 F.2d 237 (9th Cir. 1958), remanding 26 T.C. 1061 (1956), and Community Services, Inc. v. United States, 191 Ct. Cl. 76, 422 F.2d 1353 (1970). Yet, this Court has held that a plan with defective provisions which the employer attempted to amend retroactively did not become qualified for years prior to that in which the amendments were adopted.
Id.See, e.g., Coleman v. Golkin, Bomback Co., Inc., 562 F.2d 166, 169 (2d Cir. 1977) (corporation's agreement to hold 10% of stock option for employee's benefit created a trust); In re Penn Central Transp. Co., 486 F.2d 519, 524 (3d Cir. 1973), cert. denied sub nom. Baker v. Indiana Harbor Belt R.R. and Chicago North Western Transp. Co. v. Baker, 415 U.S. 990, 94 S.Ct. 1588, 39 L.Ed.2d 886 (1974) (certain monies collected by one railroad were held in trust for others despite "failure to expressly designate the relationship as one of trust"); Community Services, Inc. v. United States, 191 Ct.Cl. 76, 422 F.2d 1353, 1356-57 (1970) (employer's contributions to insurance company for employees constituted a trust despite absence of specific words of trust). In one of the earliest decisions on the Indians' status, John Marshall wrote that "[t]heir relation to the United States resembles that of a ward to his guardian."
We are persuaded by the reasoning of the court in the Trust Funds Case and the concurring opinion of Judge Adams in which Circuit Judge Weis joined, which fully considered and appropriately answered the various contentions of the bankruptcy Trustee. There was only temporary commingling of the funds which accounts for the reason that no res existed. See, Community Services, Inc. v. U.S., 422 F.2d 1353, 1357, 191 Ct.Cl. 76 (1970). Furthermore, there was no intent to establish any debtor-creditor relationship and no interest was payable on the commingled funds.
In order to qualify for the tax benefits conferred by these sections, a trust must be shown to be in existence. Tavannes Watch Co. v. Commissioner of Internal Revenue, 176 F.2d 211 (2d Cir. 1949); Community Services, Inc. v. United States, 422 F.2d 1353 (Ct.Cl. 1970). For this reason, although a trust was not required in 1935, the subsequent requirement of one by Congress, Revenue Act of 1954, soundly defeats plaintiff's "extension of the old plan" argument.