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Discussion
In general, a taxpayer is entitled to deduct the amount
contributed to an IRA. See sec. 219(a); sec. 1.219-1(a), Income
Tax Regs. The deduction for any taxable year, however, may not
exceed the lesser of $2,000 or an amount equal to the
compensation includable in the taxpayer's gross income for such
year. See sec. 219(b)(1).
However, if for any part of a taxable year, a taxpayer or
the taxpayer’s spouse is an “active participant” in a qualified
plan under section 401(a), the amount of the deduction under
section 219(a) for that year may be further limited. Sec.
219(g)(1), (5)(A)(i). Thus, in the case of married taxpayers who
file a joint return, the $2,000 limitation of section 219(b)(1)
is reduced using a ratio determined by dividing the excess of the
taxpayer's modified AGI5 over $40,000, by $10,000. See sec.
219(g)(2)(A), (3)(B)(i). This provision results in a total
disallowance of the IRA deduction for married taxpayers where
modified AGI exceeds $50,000. See Felber v. Commissioner, T.C.
4(...continued)
conceded that Mr. Brandkamp was entitled to make a nondeductible
contribution to his IRA.
5 As relevant herein, modified AGI means adjusted gross
income computed without regard to any deduction for an IRA. See
sec. 219(g)(3)(A). In petitioners’ case, modified AGI for the
year in issue is $79,300.
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Last modified: May 25, 2011