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individual's gross income for the taxable year. Sec. 219(c)(2).
If the individual is an active participant in certain pension
plans during the taxable year, the deduction is reduced if the
individual's adjusted gross income exceeds a threshold amount as
specified in section 219(g). For an individual who files a joint
Federal income tax return, this provision results in the total
disallowance of the deduction if the individual's adjusted gross
income exceeds $50,000.
The provisions of section 219(g) are only applicable if the
individual, or the individual's spouse, is an "active
participant" in certain pension plans for any part of the taxable
year. For purposes of this case, an "active participant"
includes an individual who is an active participant in a plan
established for its employees by a State or political subdivision
thereof. Sec. 219(g)(5)(A)(iii); see Freese v. Commissioner,
T.C. Memo. 1996-224.
Implicit in respondent's adjustment disallowing the
deduction here in dispute is her determination that petitioner
was an employee of the State of Nebraska. Petitioners disagree
and argue that petitioner was not an employee, but rather an
officer of the State of Nebraska. Therefore, according to
petitioners, he was not an active participant in a retirement
plan established by the State of Nebraska for its employees.
Thus, petitioners contend that the provisions of section 219(g)
do not operate to reduce or eliminate their IRA deduction.
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