John & Christina Wade - Page 4




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          which did not entitle her to receive any regular plan benefits.             
          At no time did petitioner receive benefits under the plan.                  
               In 1996, petitioners contributed $2,000 each to their                  
          respective IRA’s.  On their 1996 joint Federal income tax return,           
          they claimed an IRA deduction of $4,000 and reported adjusted               
          gross income of $77,142.  Respondent determined that petitioners            
          were not entitled to their IRA deduction pursuant to section                
          219(g).                                                                     
               In general, a taxpayer is entitled to deduct amounts                   
          contributed to an IRA.  See sec. 219(a); sec. 1.219-1(a), Income            
          Tax Regs.  The deduction in any taxable year, however, may not              
          exceed the lesser of $2,000 or an amount equal to the                       
          compensation includable in an individual taxpayer’s gross income            
          for such taxable year.  See sec. 219(b)(1).  The maximum amount             
          that may be deducted is further limited where the taxpayer or               
          spouse of the taxpayer is an “active participant” in certain                
          retirement plans.  Sec. 219(g)(1).  An “active participant” is              
          defined by section 219(g)(5) as an individual--                             
               (A) who is an active participant in--                                  
                    (i) a plan described in section 401(a) which                      
               includes a trust exempt from tax under section 501(a),                 
                    (ii) an annuity plan described in section 403(a),                 
                    (iii) a plan established for its employees by the                 
               United States, by a State or political subdivision                     
               thereof, or by an agency or instrumentality of any of                  
               the foregoing,                                                         






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