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deduction may be limited if the taxpayer was, for any part of the
taxable year, an active participant. Sec. 219(g)(1). An “active
participant” is an individual who is an active participant in a
section 401 or other employer pension plan. Sec. 219(g)(5).
This limitation results in total disallowance of the deduction
for a taxpayer filing as head of household when the total
adjusted gross income exceeds $35,000. Sec. 219(g)(2) and (3).
As relevant herein, adjusted gross income is determined without
regard to any IRA deduction. Sec. 219(g)(3)(A).
An individual is an active participant in a defined benefit
plan if for any portion of the plan year she is not excluded
under the eligibility provisions of the plan. Sec. 1.219-2(b),
Income Tax Regs. The determination of whether an individual is
an active participant shall be made without regard to whether or
not such an individual’s rights under a plan are nonforfeitable.
Sec. 219(g)(5); Hildebrand v. Commissioner, 683 F.2d 57, 58 (3d
Cir. 1982), affg. T.C. Memo. 1980-532; Eanes v. Commissioner, 85
T.C. 168, 170 (1985). If an employee makes “a voluntary or
mandatory contribution to * * * [an employer pension plan] such
employee is an active participant in the plan for the taxable
year in which such contribution is made.” Sec. 1.219-2(e),
Income Tax Regs.
CP&L’s pension plan was a Stock Purchase-Savings Pension
(401(k)) Plan which allowed contributions by the employee and
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Last modified: May 25, 2011