At the hearing the only issue stated by petitioner's counsel was whether the $ 2,500 loan and $ 4,800 loan constituted "prohibited transactions" within section 503(c)(1), it being assumed that if either loan was a prohibited transaction the deductions were 1963 U.S. Tax Ct. LEXIS 48">*63 properly disallowed. Petitioner's counsel argued that petitioner was solvent at all times in question and that the unsecured notes which it gave for the two loans were themselves "adequate security" within the meaning of section 503(c)(1), so as to prevent such loans from being classified as "prohibited transactions." He stated the matter as follows:

Now, this is the issue: Whether or not a single [simple (?)] promissory note, without something in addition thereto, as called for by the regulations, is adequate security in a situation where you have a perfectly solvent maker.

We hold that the loans were made without "adequate security" as that term is used in section 503(c)(1).

Since the statutory provisions before us are highly complex, it is entirely appropriate that they be the subject of clarifying regulations. Cf. Helvering v. Wilshire Oil Co., 308 U.S. 90">308 U.S. 90, 308 U.S. 90">102. And the very point argued by petitioner's counsel has been specifically dealt with in the Income Tax Regulations as follows (sec. 1.503(c)-1(b)):

(b) Loans as prohibited transactions under section 503(c)(1) -- (1)Adequate security. For the purposes of section 503(c)(1), which1963 U.S. Tax Ct. LEXIS 48">*64 treats as prohibited transactions certain loans by an organization without receipt of adequate security and a reasonable rate of interest, the term "adequate security" means something in addition to and supporting a promise to pay, which is so pledged to the organization that it may be sold, foreclosed upon, or otherwise disposed 40 T.C. 1018">*1024 of in default of repayment of the loan, the value and liquidity of which security is such that it may reasonably be anticipated that loss of principal or interest will not result from the loan. Mortgages or liens on property, accommodation endorsements of those financially capable of meeting the indebtedness, and stock or securities issued by corporations other than the borrower may constitute security for a loan to the persons or organizations described in section 503(c). Stock of a borrowing corporation does not constitute adequate security. A borrower's evidence of indebtedness, irrespective of its name, is itself not security for a loan, whether or not it was issued directly to the exempt organization. However, if any such evidence of indebtedness provides for security that may be sold, foreclosed upon, or otherwise disposed of in default1963 U.S. Tax Ct. LEXIS 48">*65 of repayment of the loan, there may be adequate security for such loan * * *. [Italics supplied.]

Petitioner admits that its position is in direct conflict with these regulations. However, we think that they are a reasonable interpretation of the Code and must be sustained, since it has long been established that regulations are valid unless unreasonable or plainly inconsistent with the statute and that they should not be overruled except for weighty reasons. Commissioner v. South Texas Co., 333 U.S. 496">333 U.S. 496, 333 U.S. 496">501; Fawcus Machine Co. v. United States, 282 U.S. 375">282 U.S. 375, 282 U.S. 375">378; Boske v. Comingore, 177 U.S. 459">177 U.S. 459, 177 U.S. 459">470; Brewster v. Gage, 280 U.S. 327">280 U.S. 327, 280 U.S. 327">336; Textile Mills Corp. v. Commissioner, 314 U.S. 326">314 U.S. 326, 314 U.S. 326">336-339; Colgate Co. v. United States, 320 U.S. 422">320 U.S. 422, 320 U.S. 422">426.

The plain words of the statutory provisions themselves in this case, read either alone or in conjunction with closely related provisions, leave no doubt that a loan in exchange for a wholly unsecured promissory note of the borrower1963 U.S. Tax Ct. LEXIS 48">*66 is not only not adequately secured but is not secured at all. It will not do to argue, as has been done by the petitioner, that it was amply solvent ⁶ and that therefore its note constituted "adequate security." As we read the statute, "adequate security" means adequate security and not merely the paper acknowledge of the debtor that it owes the money.

1963 U.S. Tax Ct. LEXIS 48">*67 The plain meaning of the words "lends * * * without the receipt of adequate security" indicates that the loan must be secured by something more than a mere promise of the debtor to repay. Security has been defined as "[that] which makes the enforcement or promise more certain than the mere personal obligation of the debtor or 40 T.C. 1018">*1025 promisor, whatever may be his possessions or financial standing. It may be a pledge of property, or an additional personal obligation; but it means more than the mere promise of the debtor with property liable to general execution. It is true that the greater the possessions of the promisor, the more certain the enforcement of his promise, and in a sense the creditor is more secure; but such is not the security known and expressed in the law." ⁷ An unsecured promissory note is nothing more than the mere promise of the debtor to pay; the ordinary meaning of security contemplates something more than this. It is a maxim of judicial construction that the ordinary meaning of the words used is the one the legislature intended unless there is a definite indication that they are to be construed otherwise. Cf. Avery v. Commissioner, 292 U.S. 210">292 U.S. 210, 292 U.S. 210">214.1963 U.S. Tax Ct. LEXIS 48">*68

Petitioner has referred us to no legislative materials supporting its position that Congress intended to use the words "adequate security" to encompass a simple promissory note of the debtor. To the contrary, apart from the plain meaning of the statute, it is apparent here that Congress did not intend a meaning that differs from ordinary usage. When all parts of section 503 are read together, cf. Hellmich v. Hellman, 276 U.S. 233">276 U.S. 233, 276 U.S. 233">236-237, it becomes even clearer that "adequate security" means something more than the debtor's unsecured promissory note.

The pivotal statutory language contained in section 503(c)(1) in respect of loans without "adequate security" is illumined by subsections (h) and (i), which were added to section 503 by section 30 of the Technical Amendments Act of 1958. These new subsections are set forth in the margin. ⁸ To the extent material here 1963 U.S. Tax Ct. LEXIS 48">*69 they provide in 40 T.C. 1018">*1026 substance that certain loans which might otherwise constitute prohibited transactions under section 503(c) shall not be treated as having been made without adequate security if they meet specified conditions. As will be observed from even a casual reading of subsections (h) and (i), these conditions are comprehensive and highly restrictive. Thus, section 503(h) expressly provides that a "note * * * acquired by a trust described in section 401(a) shall not be treated as a loan without the receipt of adequate security if" (1) it is acquired on the market at a price prevailing on a national registered securities exchange or at a price related to established bid and asked prices quoted by persons independent of the issuer, or from an underwriter under specified conditions, or from the issuer provided that the price is not less favorable than that currently paid by persons independent of the issuer; (2) not more than 25 percent of the obligations of the particular issue is held by the trust and at least 50 percent is held by persons independent of the issuer; and (3) not more than 25 percent of the assets of the trust is invested in obligations of persons described1963 U.S. Tax Ct. LEXIS 48">*70 in section 503(c).

1963 U.S. Tax Ct. LEXIS 48">*71 There is no doubt whatever that petitioner's notes could not qualify under these provisions. Condition (3) alone, placing a 25-percent limit on the amount of the Trust's assets that could be thus invested, would make petitioner's notes ineligible since they represented over 83 percent of the assets of the Trust at the time of the $ 2,500 loan and over 60 percent of its assets at the time of the $ 4,800 loan. Also, it is clear that the notes do not satisfy the requirements of subsection (i). Plainly, Congress could not have intended such loans to be treated as adequately secured under section 503(c) and thus render 40 T.C. 1018">*1027 subsections (h) and (i) nugatory. We are fully satisfied that in enacting these subsections Congress understood that a loan evidenced by a simple unsecured note is lacking in "adequate security" within the meaning of section 503(c), and therefore provided in (h) and (i) for the treatment of such loan as though it were adequately secured, but only to the limited extent that there is compliance with the stringent and detailed conditions set forth therein. An examination of the committee reports accompanying the legislation fortifies this conclusion. ⁹ Only1963 U.S. Tax Ct. LEXIS 48">*72 in this context do these detailed and comprehensive provisions in the 1958 Act make any sense. Congress recognized the Treasury's interpretation of "adequate security" in section 503(c)(1) as excluding an unsecured obligation of the debtor, and its enactment of subsections (h) and (i) represented a legislative effort to coordinate that interpretation with the limited exceptions carved out from section 503(c)(1) by the new provisions.

Petitioner relies in part upon Wasatch Chemical Co. v. Commissioner, 313 F.2d 843 (C.A. 10), reversing our decision in 37 T.C. 817">37 T.C. 817. That case1963 U.S. Tax Ct. LEXIS 48">*73 involved the question whether the employer's issuance of its 5-year note to a profit-sharing pension trust constituted the payment of a contribution under section 404(a). Those provisions allow the deduction of a contribution to a qualified trust in the year the contribution is "paid," and the issue was simply one of determining the year when the contribution was "paid." This Court held it was not "paid" when the note was issued to the trust, but the Court of Appeals ruled otherwise. Whether the latter decision is correct, cf. concurring opinion in Norman Petty, 40 T.C. 521">40 T.C. 521, 40 T.C. 521">524-525, is of no controlling significance here; the question now before us is whether the loan of trust assets evidenced only by an unsecured note of the employer was made without "adequate security" and therefore constituted a "prohibited transaction" within the meaning of section 503(c)(1). No such issue was involved or decided in the Wasatch case.

In view of our conclusion, set forth above, that the loans in controversy constituted prohibited transactions within section 503(c)(1) and that the Wasatch case is inapplicable, the only issue presented by petitioner1963 U.S. Tax Ct. LEXIS 48">*74 is therefore decided against it. Nowhere in its pleadings or briefs, or at the hearing, has petitioner affirmatively taken the further position, apart from its reliance upon Wasatch, that it would nevertheless be entitled to the disputed deductions for the years in controversy even if the loans should be held to be prohibited transactions. The Commissioner has suggested such a possible position 40 T.C. 1018">*1028 based upon section 503(a)(2), ¹⁰1963 U.S. Tax Ct. LEXIS 48">*76 but has indicated reasons why he thinks these provisions would not be of any help to petitioner in the light of the facts disclosed by the record in this case. ¹¹ Whether the facts of this case would preclude the denial of exemption to the Trust for the years in controversy under section 503(a)(2), notwithstanding that it had engaged in prohibited transactions, is a matter that we do not decide. Petitioner has neither raised nor presented any such issue for decision. Cf. Nathan Goldsmith, 31 T.C. 56">31 T.C. 56, 31 T.C. 56">63-64. In a field as complex as the one before us, involving statutory provisions that are so confusingly interrelated and intricate as to be exasperating, cf. Thomas G. Lewis, 35 T.C. 71">35 T.C. 71, 35 T.C. 71">76,1963 U.S. Tax Ct. LEXIS 48">*75 it is particularly important not to embark upon an exploration of issues not properly presented. In the circumstances we express no opinion as to the applicability of section 503(a)(2), nor is it necessary to give any consideration to the Commissioner's further contention that the Trust was not being operated for "the exclusive benefit" of the employees or their beneficiaries, sec. 401(a).

In order to give effect to a carryback arising from uncontested net operating losses sustained after the years before us,

Decision will be entered under Rule 50.