4
participant. For this purpose and as relevant here, adjusted
gross income is calculated without regard to the deduction for
IRA contributions. Sec. 219(g)(3).
In general, an individual is an active participant in a
profit-sharing plan during a taxable year if a forfeiture is
allocated to such individual's plan account as of a date in such
taxable year. Sec. 1.219-2(d), Income Tax Regs; see also Barret
v. Commissioner, T.C. Memo. 1980-5. An individual is not an
active participant in a plan if such individual elects, pursuant
to the plan, not to participate in the plan. Sec. 1.219-2(f),
Income Tax Regs.
Petitioners' primary argument is that an election not to
contribute to the plan is tantamount to an election not to
participate. However, the only evidence in the record indicates
that although petitioner did not contribute to the plan,
forfeitures were allocated to her account. Petitioners have
failed to establish that participation in the plan was voluntary,
or, in the alternative, that petitioner properly elected not to
participate. Petitioners have failed to establish that
petitioner was not an active participant in the plan.
Petitioners also argue that respondent should be bound by
prior allowance of IRA deductions for tax years 1990 and 1991
under identical circumstances. Petitioners urge us to adopt a
"rule of decisions", applicable in cases that are eligible for
small tax procedure, precluding the Commissioner from challenging
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Last modified: May 25, 2011