TaxProf Blog – Bryan Camp: Lesson From the Tax Court: Retirement Plan Drafting Error Loses Taxpayer $51k Deduction (September 13, 2021)

Bryan Camp has published an article on the TaxProf Blog, titled “Lesson From the Tax Court: Retirement Plan Drafting Error Loses Taxpayer $51k Deduction” which discusses the outcome of Gayle Gaston v. Commissioner, T.C. Memo. 2021-107 (Sept. 2, 2021) (Judge Marvel). The article begins as follows:

As tax practitioners know, to err is human, but to forgive requires a new set of regs.  Gayle Gaston v. Commissioner, T.C. Memo. 2021-107 (Sept. 2, 2021) (Judge Marvel), teaches us the lesson that if you want to get the §404(a) deduction for contributions to a profit-sharing plan, you need to be sure to properly link the plan to the taxpayer’s trade or business. In this case, the taxpayer received substantial deferred compensation payments from Mary Kay Cosmetics after her separation from that company and made substantial contributions to a retirement plan her tax advisor drafted for her.  Unfortunately, her one-participant profit sharing plan did not identify any trade or business as the source of the plan contributions.  That was error.  Both the IRS and the Tax Court were unforgiving.  Details below the fold.

Click here to see the full article: “Lesson From the Tax Court: Retirement Plan Drafting Error Loses Taxpayer $51k Deduction”

Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.

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