T.C. Summary Opinion 2001-149
UNITED STATES TAX COURT
CHARLES FREDERICK HELD, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6972-00S. Filed September 24, 2001.
Charles Frederick Held, Jr., pro se.
Steven M. Webster, for respondent.
PAJAK, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code in
effect for the year in issue.
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Respondent determined a deficiency in petitioner’s 1997
Federal income tax return in the amount of $560. This Court must
decide whether petitioner is entitled to a deduction in the
amount of $2,000 for contributions to his individual retirement
account (IRA) for the taxable year 1997.
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in Charlotte, North Carolina, at
the time he filed his petition.
Petitioner Charles Frederick Held, Jr. (petitioner) is a
computer network administrator. During 1997, petitioner was
employed by McNeary Insurance Consulting (McNeary) from January
to mid-February. During his employment with McNeary, petitioner
was covered under a qualified retirement plan. Petitioner
contributed $131.03 to the McNeary retirement plan in 1997.
After leaving McNeary, petitioner was employed by Hynes,
Inc., Harris Group, and Brantech, Inc., for the remainder of
1997. Petitioner was not covered under a qualified retirement
plan during his employment in 1997 by these companies.
During 1997, petitioner also made contributions which
totaled $2,000 to his IRA. He deducted the $2,000 in
contributions to his IRA on his 1997 Federal income tax return.
Petitioner’s adjusted gross income for the year in issue exceeded
$35,000. Respondent disallowed the IRA deduction.
Petitioner contends that as soon as he ceased working for
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McNeary and was not eligible to participate in a qualified
retirement plan with any of his subsequent employers, he should
be entitled to the IRA deduction because he was not an active
participant in a retirement plan for “the vast majority of the
tax year 1997” and at the time he filed his return. Respondent
contends that during 1997 petitioner was an active participant in
an employee retirement plan regardless of the length of time he
participated in the plan. Because petitioner was an active
participant and his adjusted gross income exceeded the applicable
limit, respondent’s position is that petitioner was not eligible
to deduct contributions to an IRA in 1997 under section 219(g).
In general under section 219(a) an individual is entitled to
deduct the amount contributed to an IRA. The amount of the
deduction is limited to the lesser of $2,000 or an amount equal
to the compensation includable in a taxpayer’s gross income for
the year. Sec. 219(b)(1). In addition, the amount of the
deduction may be limited if the taxpayer was an active
participant for any part of the taxable year. Sec. 219(g)(1).
An “active participant” is an individual who is an active
participant in a section 401 or other employer retirement plan.
Sec. 219(g)(5). This limitation results in total disallowance of
the deduction for a single taxpayer 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
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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 he 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, 59 (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 retirement 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. Petitioner concedes that he contributed
to a qualified retirement plan in 1997. Under section 219(g), we
find that petitioner was an active participant in an employer
retirement plan during 1997.
Petitioner further asks the Court to correct the rigid
requirements in section 219 to comport with what he believes is
the legislative intent “to permit citizens to save for their
retirement.” Unfortunately for petitioner, the legislative
history of section 219 shows that the deduction for contributions
to an IRA is to be available only where an individual “does not
participate in any other tax-supported retirement plan.” H.
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Rept. 93-807, at 128 (1974), 1974-3 C.B. (Supp.) 236, 363. While
the result to petitioner may appear harsh, we cannot ignore the
plain language of the statute, and, in effect, rewrite the
statute to achieve what would seem a more equitable result.
Eanes v. Commissioner, supra at 171.
We find that petitioner was an active participant in an
employer retirement plan and because his adjusted gross income
exceeded $35,000, he is not entitled to a deduction for his 1997
contributions to an IRA. Sec. 219(g)(1) and (2).
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.