26 C.F.R. § 1.404(a)-7 Pension and annuity plans; contributions in excess of limitations under section 404(a)(1); application of section 404(a)(1)(D).
Title 26 - Internal Revenue
When contributions paid by an employer in a taxable year to or under a pension or annuity plan exceed the limitations applicable under section 404(a)(1) but otherwise satisfy the conditions for deduction under section 404(a) (1) or (2), then in accordance with section 404(a)(1)(D), the excess contributions are carried over and are deductible in succeeding taxable years of the employer in order of time pursuant to the following rules: (a) In the case of a succeeding taxable year of the employer which ends with or within a taxable year of the pension trust during which it is not exempt under section 501(a), or, in the case of an annuity plan, during which it meets the requirements of section 404(a)(2), such excess contributions are deductible to the extent of the difference between the amount paid and deductible in such succeeding taxable year and the limitation applicable to such year under section 404(a)(1) (A), (B), or (C). (b) In the case of a succeeding taxable year of the employer which ends with or within a taxable year of the pension trust during which it is not exempt under section 501(a), or, in the case of an annuity plan, during which it does not meet the requirements of section 404(a)(2), or which ends after the trust or plan has terminated, such excess contributions are deductible to the extent of the limitation applicable to such year under section 404(a)(1)(C) (see paragraph (b) of §1.404(a)–6). The provisions of section 404(a)(1)(D) are to be applied before giving effect to the provisions of section 404(a)(7) for any year. The carryover provisions of section 404(a)(1)(D), before effect has been given to section 404(a)(7), may be illustrated by the following example for a plan put into effect in a taxable year ending December 31, 1954:
Title 26: Internal Revenue
PART 1—INCOME TAXES
§ 1.404(a)-7 Pension and annuity plans; contributions in excess of limitations under section 404(a)(1); application of section 404(a)(1)(D).
Taxable Year Ending Dec. 31, 1954 Amount of contributions paid in year........................ $100,000Limitation applicable to year............................... 60,000Amount deductible for year.................................. 60,000 ----------- Excess carried over to succeeding years.................. 40,000 =========== Taxable Year Ending Dec. 31, 1955Amount of contributions paid in year........................ $25,000Carried over from previous years............................ 40,000 ----------- Total deductible subject to limitation................... 65,000Limitation applicable to year............................... 50,000Amount deductible for year.................................. 50,000 ----------- Excess carried over to succeeding years.................. 15,000 =========== Taxable Year Ending Dec. 31, 1956Amount of contributions paid in year........................ $10,000Carried over from previous years............................ 15,000 ----------- Total deductible subject to limitation................... 25,000Limitation applicable to year............................... 45,000Amount deductible for year.................................. 25,000 ----------- Excess carried over to succeeding years.................. None
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