DocketNumber: Docket No. 13935-78.
Citation Numbers: 42 T.C.M. 1621, 1981 Tax Ct. Memo LEXIS 97, 1981 T.C. Memo. 644
Filed Date: 11/4/1981
Status: Non-Precedential
Modified Date: 11/21/2020
1981 Tax Ct. Memo LEXIS 97">*97 During a part of 1975, H was employed by SRC, which maintained a savings and profit-sharing plan for its employees. H's employment with SRC was terminated before he was eligible to receive employer contributions to such plan for 1975. After his employment with SRC was terminated, H made a contribution to an IRA.
MEMORANDUM FINDINGS OF FACT AND OPINION
SIMPSON,
FINDINGS OF FACT
Some of the facts have been stipulated, and those facts are so found.
The petitioners, Kenneth H. and Bonnie S. Smith, husband and wife, maintained their legal residence in Lewisville, Tex., at the time they filed their petition in1981 Tax Ct. Memo LEXIS 97">*98 this case. They timely filed their joint Federal income tax return for 1975 with the Internal Revenue Service Center, Austin, Tex.
Mr. Smith commenced working for Sears, Roebuck & Co. (Sears) in 1969 and continued working there until September 1975, when Sears terminated his employment. During the years Mr. Smith was employed by Sears, it maintained for its employees the Savings and Profit Sharing Fund of Sears Employees (the plan). The plan provided for both employee and employer contributions. During 1975, employer contributions were only credited to the accounts of individuals who were employees as of November 15.
During 1975, Mr. Smith made contributions of $ 750 to the plan. After he was terminated, such amount was withdrawn from the plan and returned to him without interest. Since Mr. Smith was not employed by Sears as of November 15, 1975, no employer contributions were credited to his account for that year.
On December 15, 1975, Mr. Smith contributed $ 1,500 to an IRA. In his notice of deficiency, the Commissioner disallowed a deduction for such contribution on the ground that Mr. Smith was ineligible to contribute to an IRA. 1
1981 Tax Ct. Memo LEXIS 97">*99 OPINION
The petitioners contend that the intent of Congress in authorizing contributions to an IRA was to provide a tax benefit for the retirement savings of those taxpayers who did not receive benefits during the taxable year from an employer-sponsored pension or profit-sharing plan. Since Mr. Smith received no employer contributions to the plan during 1975, they argue that they should be allowed to deduct his contribution to an IRA. The Commissioner contends that during part of 1975, Mr. Smith was an active participant in a plan described in
Subject to certain limitations, section 219(a) allows taxpayers to deduct amounts paid in cash to an IRA during the taxable year. However, section 219(b)(2) provides that
No deduction is allowed under subsection (a) for an individual for1981 Tax Ct. Memo LEXIS 97">*100 the taxable year if for
(A) he was an active participant in--
(i) a plan described in
Section 219 does not define the term "active participant." See
An individual is to be considered an active participant in a plan if he is accruing beneits under the plan even if he only has forfeitable rights to those benefits. Otherwise, if an individual were able to,
In
1981 Tax Ct. Memo LEXIS 97">*102 In
Since
The parties assume that1981 Tax Ct. Memo LEXIS 97">*104 the plan was a "qualified plan" 5 within the meaning of
The petitioners have the burden of proof.
1981 Tax Ct. Memo LEXIS 97">*106
1. In his notice of deficiency, the Commissioner did not assert an excise tax (see
2. All statutory references are to the Internal Revenue Code of 1954 as in effect during the year in issue. ↩
3. The Commissioner concedes that after Sears terminated his employment, Mr. Smith was not employed by an employer who maintained a retirement plan.↩
4. See also
5. The petitioners did not introduce into evidence a copy of the plan.↩
6. Sec. 311 of the Economic Recovery Tax Act of 1981, Pub. L. 97-34, 95 Stat. 274, 283, provides that an individual, whether or not he is an active participant in a qualified plan, can establish and deduct contributions to an IRA. However, Congress has restricted that privilege to tax years beginning after Dec. 31, 1981, and we have no authority to apply such liberalized provision to earlier years.↩
Richard W. And Janet Orzechowski v. Commissioner of ... , 592 F.2d 677 ( 1979 )
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