Howard E. Clendenen - Page 8

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          "participant's compensation".  Such being the case, respondent              
          contends that the limits of section 415(c)(1) were exceeded, and            
          the plan and trust were not qualified during the years at issue.            
               Section 415(c)(3)(A) simply defines participant's                      
          compensation as "the compensation of the participant from the               
          employer for the year." However, section 402(a)(8) provides:                
               For purposes of this title, contributions made by an                   
               employer on behalf of an employee to a trust which is a                
               part of a qualified cash or deferred arrangement (as                   
               defined in section 401(k)(2)) shall not be treated as                  
               distributed or made available to the employee nor as                   
               contributions made to the trust by the employee merely                 
               because the arrangement includes provisions under which                
               the employee has an election whether the contribution                  
               will be made to the trust or received by the employee                  
               in cash.  [Emphasis added.]                                            
          Also, section 1.415-2(d)(2)(i), Income Tax Regs.,5 provides that            
          compensation does not include "Contributions made by the employer           
          to a plan of deferred compensation to the extent that, before the           
          application of the section 415 limitations to that plan, the                
          contributions are not includable in the gross income of the                 
          employee for the taxable year in which contributed."                        
          Furthermore, section 1.401(k)-1(a)(4)(ii), Income Tax Regs.,                
               Except as provided in paragraph (f) of this section,                   
               [dealing with the correction of excess contributions]                  
               elective contributions under a qualified cash or                       
               deferred arrangement are treated as employer                           

               5  This provision was renumbered as sec. 1.415-2(d)(3)(i),             
          Income Tax Regs., effective for years after Jan. 1, 1987.  T.D.             
          8361, 1991-2 C.B. 310, 318.                                                 

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