William H. and Sandra G. Flank - Page 6

                                        - 5 -                                         
          deductions claimed.  Rule 142(a)(1); INDOPCO, Inc. v.                       
          Commissioner, 503 U.S. 79, 84 (1992).                                       
               With certain limitations, a taxpayer is entitled to deduct             
          the amounts contributed to an IRA.  Sec. 219(a).  The deduction,            
          however, may not exceed the lesser of (1) the deductible amount             
          or (2) an amount equal to the compensation includable in the                
          taxpayer’s gross income for such taxable year.  Sec. 219(b)(1).             
          For 2002, the deductible amount is $3,000.  Sec. 219(b)(5)(A).              
          The deductible amount is increased to $3,500 if the taxpayer was            
          50 or older before the close of the taxable year.  Sec.                     
          219(b)(5)(B).                                                               
               If, for any part of a taxable year, the taxpayer or the                
          taxpayer’s spouse is an “active participant” in a qualified plan            
          under section 403(b), the amount of the deduction allowed under             
          section 219(a) for that year may be further limited.  Sec.                  
          219(g)(1), (5)(A)(iv).  In the case of a married taxpayer who               
          filed a joint income tax return, the deductible amount is reduced           
          using a ratio determined by dividing the excess of the modified             
          AGI4 over the applicable dollar amount by $10,000.  Sec.                    
          219(g)(2)(A).  The applicable dollar amount was $54,000 in 2002.            


               4For purposes of sec. 219(g), modified AGI refers to AGI               
          that is computed without regard to any deduction for an IRA.                
          Sec. 219(g)(3)(A).  Moreover, in applying sec. 219(g)(2) and (3),           
          the Court looks to the combined AGI of married taxpayers filing             
          jointly and not to an individual spouse’s AGI to determine the              
          reduction or elimination of the IRA contribution deduction.  See            
          Ho v. Commissioner, T.C. Memo. 2005-133.                                    




Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011