These days, there are enough options for correcting the improper operation of a qualified retirement plan that one does not read very often about the IRS disqualifying a plan altogether. But every once in a while, a plan sponsor comes along that pushes the IRS to its limits. Such was the case for the sponsor (in this case, a dentist) of an employee stock ownership plan (ESOP) with respect to which the Tax Court concluded the IRS did not abuse its discretion when the IRS disqualified the ESOP and the underlying trust. The fatal errors that caused the IRS to disqualify the ESOP included: (1) a failure to timely amend the plan document to reflect changes in the laws governing qualified retirement plans; (2) a failure to vest participants in their account balances in accordance with the plan’s vesting schedule; (3) a failure to use an independent appraiser to value the employer securities held by the ESOP, as is legally required of an ESOP that holds employer securities not readily tradeable on an established securities market; and (4) a failure to limit allocations made to the dentist’s plan account in accordance with the limitation on annual additions under IRC § 415(c). With respect to at least some of the errors, the Tax Court noted that the plan sponsor was offered the opportunity to correct the failures through the Closing Agreement Program and chose not to do so. Accordingly, the Tax Court sustained the IRS’s determination that the ESOP was disqualified all the way back to the 1987 plan year and for all plan years thereafter. (Michael C. Hollen, D.D.S. P.C. v. Commissioner, Tax Ct. 2011)