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participant in 1998, she is not entitled to deduct a contribution
to an IRA.
An active participant is defined by section 219(g)(5) to
include an individual who is an active participant in a plan
described in section 401(a). 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 her
account, (2) an employer contribution is added to her account, or
(3) a mandatory or voluntary contribution is made by the
individual to her account. Sec. 1.219-2(d)(1) and (e), Income
Tax Regs. Petitioner admits that during the first 5 months of
1998 she was covered by the pension plan offered by her employer.
Furthermore, the Form W-2, Wage and Tax Statement, issued to
petitioner for that year indicates she made an elective deferral
of $1,056.16. Therefore, petitioner was an active participant in
her employer’s pension plan.
Petitioner argues that she should be allowed to deduct at
least half of the IRA contribution for 1998 because she
participated in the pension plan for less than half of the year.
The law is clear that the restriction on deductions for
contributions to IRA’s applies to taxpayers who are active
participants for any portion of a taxable year. Sec. 219(g)(1).
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Last modified: May 25, 2011