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In general, a taxpayer is entitled to deduct the amount of
his contribution to an IRA. See sec. 219(a). The deduction in
any taxable year generally is limited to $2,000. See sec.
219(b)(1)(A). The amount of the deduction is further limited
where the taxpayer or his spouse is, for any part of the taxable
year, an “active participant” under certain pension plans. See
sec. 219(g). In such a case, for married taxpayers who file a
joint return, the deduction allowable with respect to either
spouse is reduced to zero where the taxpayers’ adjusted gross
income (as modified by section 219(g)(3)(A)) equals or is greater
than $50,000. See id. Petitioners’ modified adjusted gross
income in 1995, as reflected on their return, exceeded $50,000.
Thus, if petitioner was an active participant in 1995,
petitioners are not entitled to deduct contributions made to
IRA’s.
An active participant is defined by the statute to include
an individual who is an active participant in a plan described in
section 401(a). See sec. 219(g)(5)(A)(i). Elaborating upon this
circular definition, the regulations provide that an individual
is an active participant in a profit-sharing plan if, during the
taxable year, (1) a forfeiture is allocated to his account, (2)
an employer contribution is added to his account, or (3) a
mandatory or voluntary contribution is made by the individual to
his account. See sec. 1.219-2(d)(1) and (e), Income Tax Regs.
An individual’s status as an active participant in a plan is not
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Last modified: May 25, 2011