Illustration of Application of Provisions of Section 404(a)(7) and of Treatment of Carryovers for Overlapping Pension and Profit-Sharing Trusts Put Into Effect in 1954 and Covering the Same Employees (All Figures Represent Thousands of Dollars and all Taxable (Calendar) Years of the Employer are Years Which End With or Within A Taxable Year of the Trust for Which it is Exempt Under Section 501(a))
Taxable calendar years | ||||
1954 | 1955 | 1956 | 1957 | |
BEFORE GIVING EFFECT TO SECTION 404(a)(7) | ||||
Pension trust contributions and limitations, deductions, and carryovers under section 404(a)(1): | ||||
1. Contributions paid in year | $215 | $85 | $140 | $60 |
2. Contributions carried over from prior years | 0 | 5 | 0 | 20 |
3. Total deductible for year subject to limitation | 215 | 90 | 140 | 80 |
4. Limitation applicable to year | 210 | 175 | 120 | 85 |
5. Amount deductible for year | 210 | 90 | 120 | 80 |
6. Contributions carried over to succeeding years | 5 | 0 | 20 | 0 |
Profit-sharing trust contributions and limitations, deductions, and carryovers under section 404(a)(3): | ||||
7. Contributions paid in year | 200 | 125 | 105 | 65 |
8. Contributions carried over from prior years | 0 | 35 | 10 | 0 |
9. Total deductible for year subject to limitation | 200 | 160 | 115 | 65 |
10. Limitation applicable to year | 165 | 150 | 135 | 1 110 |
11. Amount deductible for year | 165 | 150 | 115 | 65 |
12. Contributions carried over to succeeding years | 35 | 10 | 0 | 0 |
APPLICATION OF SECTION 404(a)(7) | ||||
Totals for pension and profit-sharing trust: | ||||
13. Amount deductible for year under section 404(a)(7): | ||||
(1) 30 percent of compensation covered in year2 | (3 ) | 300 | 270 | 180 |
(2) (i) (a) 25 percent of compensation covered in year2 | 275 | 250 | 225 | 150 |
(b) Total amount otherwise deductible for year: item 5 plus item 11 | 375 | 240 | 235 | 145 |
(c) Smaller of (a) or (b) | 275 | 240 | 225 | 145 |
(ii) Carryover from prior years under section 404(a)(7) | 0 | 100 | 40 | 10 |
(iii) Sum of (i)(c) and (ii) | 275 | 340 | 265 | 155 |
(3) Amount deductible: Lesser of (1) or (2)(iii) | 275 | 300 | 265 | 155 |
14. Carryover to succeeding years under section 404(a)(7): item 13(2)(ii) plus item 3(2)(i)(b) minus item 13(3) | 100 | 40 | 10 | 0 |
1 Includes carryover of 20 from 1956.
2 Compensation otherwise paid or accrued during the year to the employees who are beneficiaries under the trusts in the year.
3 30 percent limitation not applicable to first year of plan.
26 C.F.R. §1.404(a)-13