Roblene, Inc. - Page 17




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               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 includible 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.,           
          provides:                                                                   
               (ii) Treatment of elective contributions as employer                   
               contributions.  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                   
               contributions.  Thus, for example, elective contributions              
               are treated as employer contributions for purposes of                  
               sections 401(a) and 401(k), 402, 404, 409, 411, 412, 415,              
               416, and 417.                                                          
               The issue in respect of elective deferrals has been before             
          this Court under substantially identical circumstances.  See                
          Howard E. Clendenen, Inc. v. Commissioner, T.C. Memo. 1998-318;             
          Steel Balls, Inc. v. Commissioner, T.C. Memo. 1995-266, affd. per           
          curiam without published opinion 89 F.3d 841 (8th Cir. 1996).8              
          We rejected the same arguments presented herein and concluded               
          that respondent's position was clearly supported by the statute             


               8The Small Business Job Protection Act of 1996, Pub. L. 104-           
          188, sec. 1434(a), 110 Stat. 1807, added sec. 415(c)(3)(D) which            
          includes certain deferrals in participant's compensation,                   
          effective for years beginning after Dec. 31, 1997.  This                    
          amendment does not apply to the instant case.  We note, however,            
          that the legislative history makes clear that Congress considered           
          the provisions of the then-existing law as requiring the result             
          reached herein and specifically intended to change the law for              
          future years.  See H. Rept. 104-586 at 112 (1996), 1996-3 C.B.              
          331, 450; S. Rept. 104-281 at 80 (1996); H. Conf. Rept. 104-737             
          at 245-246 (1996), 1996-3 C.B. 741, 985-986.                                




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