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Section 219(g) limits the allowable deduction where the
individual or the individual's spouse is an active participant
for any part of any plan year ending with or within a taxable
year. An active participant is defined to include, inter alia,
an individual who is an active participant in "a plan established
for its employees by the United States, by a State or political
subdivision thereof, or by an agency or instrumentality of any of
the foregoing". Sec. 219(g)(5)(A)(iii). The allowable deduction
is reduced, as pertinent herein, by a factor based on the
adjusted gross income of the individual and the individual's
spouse. Sec. 219(g)(2).3 The net effect of this provision is
that the allowable deduction begins to be reduced when the joint
adjusted gross income reaches $40,000 and completely phases out
where the joint adjusted gross income reaches $50,000.
Respondent contends that petitioner did not make a qualified
retirement contribution to an IRA during 1994. In the
3
Sec. 219(g)(2)(A) provides that the $2,000 dollar limitation
shall be reduced by:
the amount which bears the same ratio to such
limitation as--
(i) the excess of--
(I) the taxpayer's adjusted gross income for such
taxable year, over
(II) the applicable dollar amount, bears to
(ii) $10,000.
In the case of a taxpayer filing a joint return, the
applicable dollar amount is $40,000. Sec. 219(g)(3)(B). As
relevant here, adjusted gross income is determined without regard
to any deduction for an IRA. Sec. 219(g)(3)(A).
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Last modified: May 25, 2011