Sklar, Greenstein & Scheer, P.C. - Page 8




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          an employer to a deferred compensation plan, section 404 applies            
          and preempts the deductibility of such contributions under any              
          other section.7  Section 404(a) provides:                                   
               If contributions are paid by an employer to or under a                 
               stock bonus, pension, profit-sharing, or annuity plan,                 
               or if compensation is paid or accrued on account of any                
               employee under a plan deferring the receipt of such                    
               compensation, such contributions or compensation shall                 
               not be deductible under this chapter; but, if they                     
               would otherwise be deductible, they shall be deductible                
               under this section, subject, however, to the following                 
               limitations as to the amounts deductible in any year *                 
               * *                                                                    
          As applicable, section 404(a)(1)(A) places generally the                    
          deductible limit on contributions at the amount necessary to                
          satisfy the full funding standard provided by section 412(a).               
          The pre-emptive nature of section 404 as to plan contributions is           
          further clarified by section 1.162-10(a), Income Tax Regs., which           
          provides that no deduction is allowed under section 162 if the              
          amounts are used to provide benefits under a deferred                       
          compensation plan.                                                          


               7The predecessor to sec. 404 first appeared in the Code as             
          sec. 23(p) of the Revenue Act of 1928, ch. 852, 45 Stat. 791,               
          799-802.  Before adoption of the Revenue Act of 1942, ch. 619, 56           
          Stat. 798, contributions made to employees' deferred compensation           
          funds could be deducted either as "ordinary and necessary"                  
          business expenses under sec. 23(a) (the predecessor to sec. 162),           
          or under the specific provisions for such deductions under sec.             
          23(p).  See sec. 23(p) (1939); Tavannes Watch Co. v.                        
          Commissioner, 176 F.2d 211 (2d Cir. 1949), revg. 10 T.C. 544                
          (1948).  The Revenue Act of 1942 amended sec. 23(p), making it              
          the exclusive section under which deductions for contributions to           
          deferred compensation plans could be claimed.  See ch. 619, 56              
          Stat. 798, 863.                                                             




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