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401(a). As a general rule, a taxpayer is entitled to deduct
amounts contributed to an IRA. Sec. 219(a); sec. 1.219-1(a),
Income Tax Regs. The deduction in any taxable year may not
exceed the lesser of $2,000 or an amount equal to the
compensation includable in the individual's gross income for the
taxable year. Sec. 219(b)(1). Section 219(g) imposes a further
limitation on IRA deductions where a taxpayer or a spouse is an
"active participant" for any part of the taxable year. An
individual is considered an active participant in a plan if he is
accruing benefits under the plan even if he has only forfeitable
rights under the plan and such rights are forfeited before the
end of the taxable year. Hildebrand v. Commissioner, 683 F.2d 57
(3d Cir. 1982), affg. T.C. Memo. 1980-532.
While Congress included a definition of "active participant"
in section 219(g)(5), that definition itself uses the term
"active participant". However, Congress' intent as to the
meaning of "active participant" is clear from the report of the
House Committee on Ways and Means:
An individual is to be considered an active participant
in a plan if he is accruing benefits under the plan
even if he only has forfeitable rights to those
benefits. * * * [H. Rept. 93-807 at 129 (1974), 1974-3
C.B. (Supp.) 236, 364.]
See also Eanes v. Commissioner, 85 T.C. 168, 171 (1985). The
regulations further provide that "an individual is an active
participant * * * if for any portion of the plan year * * * he is
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Last modified: May 25, 2011