- 16 -
II. Elective Deferrals
Petitioner argues that the amounts of the elective salary
deferrals, which the participant chose not to receive as cash but
rather to have contributed to the ESOP, are employee
contributions and are includable in "participant's compensation".
Robert and Charlene Peers elected salary deferrals for the 1987
and 1988 taxable years in the respective amounts of at least
$45,000 and $7,000.5
Section 402(a)(8)6 provides:
(8) Cash or deferred arrangements.--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.
In addition, section 1.415-2(d)(2)(i),7 Income Tax Regs.,
provides that compensation does not include:
5We note that respondent contends that Robert and Charlene
Peers elected $17,000 in elective salary deferrals for 1988.
This difference is immaterial to the outcome.
6Sec. 402 was amended by sec. 521(a) of the Unemployment
Compensation Amendments of 1992, Pub. L. 102-318, 106 Stat. 290,
300-310. The above-quoted language is currently found in sec.
402(e)(3).
7This provision was renumbered as sec. 1.415-2(d)(3)(i),
Income Tax Regs., effective for years after Jan. 1, 1987. See
T.D. 8361, 1991-2 C.B. 310, 318.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011