Richard L. and Marjorie A. Freese - Page 5

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                    (v) a simplified employee pension (within the meaning             
               of section 408(k)), or                                                 
               (B) who makes deductible contributions to a trust described            
               in section 501(c)(18).                                                 
               The determination of whether an individual is an active                
               participant shall be made without regard to whether or not             
               such individual's rights under a plan, trust, or contract              
               are nonforfeitable.  An eligible deferred compensation plan            
               (within the meaning of section 457(b)) shall not be treated            
               as a plan described in subparagraph (A)(iii).                          
          In the case of a taxpayer who files a joint return, the deduction           
          is reduced using a ratio that is a function of the taxpayer's               
          modified adjusted gross income (modified AGI).3  Sec. 219(g)(2)             
          and (3).  This provision results in a total disallowance of the             
          IRA deduction where the total modified AGI reported on a joint              
          return exceeds $50,000.  See Felber v. Commissioner, T.C. Memo.             
          1992-418, affd. without published opinion 998 F.2d 1018 (8th Cir.           
          1993).                                                                      
               Petitioner contends that he is entitled to a deduction for             
          his entire IRA contribution because PERS is an eligible deferred            
          compensation plan.  Petitioner argues, therefore, that he is not            
          an "active participant" within the meaning of section 219(g)(5).            
               As relevant herein, a deferred compensation plan is defined            
          by section 457 as a plan established and maintained by a State,             
          political subdivision of a State, agency, or instrumentality                
          thereof, or any other nongovernmental organization exempt from              

          3    As relevant herein, modified adjusted gross income means               
          adjusted gross income computed without regard to any deduction              
          for an IRA.                                                                 




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