Masonry Magazine September 1974 Page. 21
10% of the employees' current compensation for the year. However, the plan also provided that should he so desire the contributions to the plan could be suspended. Should there be such a suspension, the plan required that such missed contributions and earnings thereon be made up. In 1972, the employer had to suspend making his contributions to the plan. However, in 1973, he was able to and did make the regular contribution required under the plan. In addition, the employer made a payment in the amount of the contribution that was missed in 1972.
Complications developed when the employer sought to deduct the amount of the made-up contributions. Due to certain provisions in the tax laws, there was a restriction on the amount the employer could deduct in any year. The contributions paid to the trust in 1973 which were paid to make up for contributions missed in 1972 were not deductible in full in the year paid.
Such amount must be deducted at not more than 10% a year under Section 404(a)(1)(C) of the Code or deducted ratably over the remaining future service of each employee or such longer period as specified in Section 404(a) (1)(B). (Rev. Rul. 74-350.)
SMALL TAX CASE
Taxpayers should be aware of the fact that there is a Small Tax Case Division of the U.S. Tax Court in which disputes between taxpayers and the IRS that involve $1,500 or less can be tried. There is a $10 fee. This Small Tax Case Division holds hearings in 104 cities.
There is an IRS publication No. 556 which explains the various appeal rights of taxpayers. The publication can be obtained free of charge at IRS offices.
TAX ADVICE
A chilling note to taxpayers came up in a recent case in the Tax Court. There the taxpayer argued that he had attempted to follow the IRS regulations and and the commissioner's "Your Federal Income Tax" publication in determining the amount he could deduct as a storm casualty loss.
The court agreed that the Regulations can at times be confusing even to attorneys. However, in this case, the court felt the regulations were clear. With regard to the publication, "Your Federal Income Tax," the court said, sorry, but it was just not a source of authoritative law in the tax field. (Ford v. Commissioner, T.C. Memo 1974-101.)
TAX-OPTION CORPORATION
A husband and wife had a laundry business. They filed for and were granted articles of incorporation under the state law. Among other things, they authorized but never issued stock, maintained a checking account in the corporate name, and paid annual state corporate franchise taxes.
In spite of these acts, the taxpayers wanted to be taxed not as a corporation but as a tax-option corporation. They filed their returns for the year and on it included the laundry business losses.
The Tax Court agreed with the commissioner-the taxpayers could not take such losses on their personal returns. Form 2553, the form to be filed in order to be taxed as a small business, a subchapter S corporation has to be filed to obtain the tax treatment these taxpayers desired. (Hooper v. Commissioner, T.C. Memo 1974-176.)
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