Workshop 9 Maximum Deductions

Transcription

1 Workshop 9 Maximum Deductions Lauren Okum, MSPA Kevin J. Donovan, CPA, MSPA DC Plans Elective Deferrals PLR an employee who is treated as benefitting (for 410(b) purposes) under a section 401(k) plan for a plan year, but who is not eligible for any employer contributions other than elective deferrals, would not be considered a beneficiary of the trust for purposes of section 404(a)(3)(i)(l) since section 404(n) of the Code requires the limits on deductible contributions to be applied without regard to the existence or absence of elective deferrals Accordingly, the deductible limit under section 404(a)(3)(A) of the Code is determined based on compensation paid or accrued during the taxable year to all employees who are beneficiaries under the Plans during the taxable year taking into account only those employees who have allocations other than elective deferrals 1

2 DC Plans Elective Deferrals While a PLR is not a Revenue Ruling and cannot be relied upon except by the taxpayer requesting the PLR, we think it is correct. So, an employee only eligible to make 401(k) deferrals is not a beneficiary for this purpose. Multiple DC Plans Multiple plans, IRC 404(a)(3)(A)(iv): If the contributions are made to 2 or more stock bonus or profit-sharing trusts, such trusts shall be considered a single trust for purposes of applying the limitations in this subparagraph. See PLRs and

3 Multiple DC Plans Example. Company X has 10 union employees. The total compensation of such employees is $400,000. It has only 2 non-union employees, the owner and her spouse, each of whom earn $40,000 annually. Under the collective bargaining agreement company X makes a profit sharing contribution equal to 10% of compensation for the union employees, for a total of $40,000. The deduction limit under Code 404(a)(3)(A)(i)(I) is 25% of $480,000 or $120,000. For 2002 this leaves room for $80,000 to be contributed and deducted to a profit sharing plan for the owner and her spouse. Since there are no other non-union employees, 401(a)(4) and 410(b) are not a problem. With the 100% of comp. 415(c) limit $40,000 can be allocated to each spouse. DC Plans Effect of Overlapping Plan/Tax Year Effect of overlapping Plan/Tax Year Recall 25% limit based on tax-year compensation Example Calendar plan-year June 30 tax-year Participant comp. June 30, 2008 = $400,000 Employer contribution for 2007 plan-year = $75,000 If timely, $25,000 of contribution for 2008 plan year could be deducted in tax-year-ended June 30, 2008 But not matching cont. on post 6/30/08 deferrals Revenue Rulings ; See later discussion re IRC 404(a)(6) and RR

4 DB Plans Maximum deduction greater of: 430 minimum [ 404(o)(1)(B)] 404(o)(2) amount [ 404(o)(1)(A)] With respect to each plan year ending with or within the taxable year Similar language in 404(a)(1) pre PPA DB Plans Effect of Overlapping Plan/Tax Year Plan Year Tax Year Limit based on plan year beginning within tax year Limit based on plan year ending within tax year Weighted average of above based on number of months of each plan year falling within tax year Reg (a)-14(c) Is this still a valid reg post PPA 2006? Absent contrary guidance likely reasonable to assume it is still valid 4

5 Defined Benefit Plans 404(o)(2) amount = sum of: Target normal cost, Funding target, and Cushion amount, over Actuarial value assets 404(o)(2)(A) Cushion Amount IRC 404(o)(3)(A)(ii)(I): The cushion amount for any plan year is the sum of (i) 50 percent of the funding target for the plan year, and (ii) the amount by which the funding target for the plan year would increase if the plan were to take into account (I) increases in compensation which are expected to occur in succeeding plan years 5

6 Cushion Amount We re going to focus on (ii) above i.e., what are the limits in calculating the increase in funding target by taking into account future expected compensation increases? Future Comp. Increases First we turn to 404(o)(3)(B) which says: (B) Limitations (i) In general In making the computation under subparagraph (A)(ii), the plan s actuary shall assume that the limitations under subsection (l) and section 415(b) shall apply. (A)(ii) is the computation we are looking at, the future compensation increases. 6

7 Future Comp. Increases This is saying the actuary must apply the limitations under: 404(l): which says that we have to recognize the 401(a)(17) compensation limit, and 415(b): which contains both the 415 $ limit and the 415 % of pay limit Cushion Increase Assuming Compensation Grows First, how do we recognize the limitation under 404(l)? This is saying that we cannot project that the future compensation will grow in excess of the current 401(a)(17) limit, currently $260,000. However, there is an exception to this rule in 404(o)(3)(B)(ii) which allows a plan that is covered by the PBGC to assume future increases in the compensation limit. 7

8 Cushion Increase Example Example. Current and past compensation is $100,000, first year of participation, 1 year of past service. Plan benefit formula is 10% of pay times years of service. Plan is not subject to PBGC. Accrued benefit at BOY is $833.33/mo, with $ accrual during the year. FT is $85,768, TNC is $85,768. Cushion without any comp projection is $42,884, max deductible is: $85,768 + $85,768 + $42,884 = $214,420 Cushion Increase Example Example. If Participant s compensation was $200,000, then AB at BOY is $ , with $83.33 accrual during year. FT is $171,536, TNC is $3,903. Cushion is $85,768, max deductible is: $171,536 + $3,903 + $85,768 = $261,207 Can actuary assume this compensation increase? 8

9 Cushion Increase Example First, what evidence does actuary possess that allows him to assume compensation will increase? If BOY valuation and increased compensation already occurred in year, can we assume this as of BOY? We think so Is owner s word good enough to assume this compensation increase? Maybe they already have work on the books to justify this? Next, is actuary assuming compensation in excess of 401(a)(17) for a non-pbgc plan? Nope, so we re good there Cushion Increase Limitations Can the actuary assume a higher 415(b) limit than what it currently is (based on average comp)? Some (most?) actuaries say that this code section really only means to limit the 415 $ limit, not the 415 % of pay limit. That the limit on the 401(a)(17) compensation effectively takes care of the 415 % of pay limit. They argue: Otherwise it makes no sense They also use the argument that this was allowed pre-ppa with the projected unit credit cost method They also argue that this is just for deduction purposes, so no big deal, right? Let s check the regs on this Oh yeah, there are none 9

10 Cushion Increase Limitations So, we have a code section that says we, as actuaries, must reflect the limitations of code section 415(b). It does not say code section 415(b)(1)(A), the dollar limit, so it includes both the 415 $ limit and the % limit. What if the owner s past compensation is only $25,000 on average. But their 2013 compensation was $300,000. Would you increase their deduction limit for 2013 by assuming a BOY accrued benefit in excess of their 415 % of pay limit, thus increasing their deduction limit by over $100,000? Controlled Groups IRC 414(b) For purposes of sections 401, 408(k), 408(p), 410, 411, 415 and 416, all employees of all corporations which are members of a controlled group of corporations (within the meaning of section 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(c)) shall be treated as employed by a single employer. With respect to a plan adopted by more than one such corporation, the applicable limitations provided by section 404(a) shall be determined as if all such employers were a single employer, and allocated to each employer in accordance with regulations prescribed by the Secretary. 10

11 Controlled Group Deductions Example: Two corporations, both owned by the same individual. Corp A sponsors a 3% safe harbor 401k plan with 2% profit sharing (Plan A), Corp B sponsors a defined benefit plan (Plan B). Assume all combined testing passes, and Plan A contributions are necessary for testing to pass in Plan B. Controlled Group Deductions In the past, Corp A has taken the deduction for contributions made to Plan A and Corp B has taken the deduction for contributions made to Plan B. In 2014, Corp A has no income, but Corp B does. Can Corp B make the contributions and take the deduction for these made to Plan A? 11

12 Controlled Group Deductions First, keep in mind that since this is a controlled group, the deduction limits are determined on a combined basis. So 404(a)(7) will apply to the group. [IRC 414(b)] Next, what do the regulations say about allocation of this deduction limit to the members of the controlled group? Oh yeah, no regs Finally, since 404 does not specify who can deduct contributions, we should look to section 162. Controlled Group Deductions Code Section 162: This section determines if expenses are ordinarily deductible by a trade or business. It limits deductions to expenses which are ordinary and necessary In the past, the IRS has ruled that it is not an ordinary and necessary business expense for one corporation to provide retirement benefits for the employees of another corporation. Rev Rul , Rev Rul , Rev Rul , PLR But can it be argued that the contributions to Plan A by Corp B are necessary in order for Plan B to remain qualified? 12

13 Controlled Group Deductions In Rev Rul , the IRS stated that the only exception to having each corporation take the deduction for the contributions allocated to its own employees is for termination liability payments under IRC 404(g). 404(g) specifically grants a corporation authority to deduct contributions made for purposes of meeting their termination liability for a PBGC plan, even though the corporation did not employ the employees in the plan. This is the only known exception for deductions Controlled Group Deductions Let s flip this: What if Corp A wants/needs to deduct the contributions made to Plan B? IRC 412(b)(2) states that each member of a controlled group shall be jointly and severally liable for payments of contributions required under code section 430. Is this sufficient to justify the ordinary and necessary requirement under code section 162? Many think so, but we know of nothing official. Until we get regulations under 404, we need to be careful. Safest course of action is for each corporation to deduct the contributions based on compensation paid by that corporation. 13

14 Combined Plan Limits IRC 404(a)(7) Applies where employer contributes to both DB and DC plan for same tax year [IRC 404(a)(7)(A)]; AND At least one employee is a beneficiary in both plans [IRC 404(a)(7)(C)(i)] Combined Plan Limits IRC 404(a)(7) Deduction limited to greater of: 25% of compensation paid to beneficiaries of the plans (i.e. either plan) during the tax year; or contributions to DB plan to extent not in excess of minimum funding requirement Not less than funding target over actuarial value of assets (Note absence of TNC) IRS has indicated that MAP does apply for this purpose (IRS phone forum) IRC 404(a)(7)(A) 14

15 Combined Plan Limits IRC 404(a)(7) Limit does not apply - To extent employer contributions to DC plan do not exceed 6% of compensation (of DC plan beneficiaries ) IRC 404(a)(7)(C)(iii) To multiemployer plans IRC 404(a)(7)(C)(v) To PBGC plans IRC 404(a)(7)(C)(iv) Combined Plan Limits IRC 404(a)(7) Notice Q&A 8 - where DC contributions exceed 6% of comp, only DC contributions over 6% considered in determining 25% limit Effectively translates to 31% limit BUT, only consider compensation of DC beneficiaries in determining the 6% How much do you have to allocate to someone to count their comp?» $5 for a $260K employee?? 15

16 Combined Plan Limits IRC 404(a)(7) DB Plans exempt from PBGC coverage Plans of professional group if plan never covered more than 25 active participants Physicians, dentists, D.O.s, O.D.s, lawyers, CPAs, P.E.s, architects, actuaries, others where license requires advanced study Not APAs, QPAs, RIAs, real estate prof, etc. ERISA Title IV 4021(b)(13), 4021(c)(2) Combined Plan Limits IRC 404(a)(7) DB Plans exempt from PBGC coverage Plans covering only substantial owners A substantial owner is an individual who (at any time during the prior 60-months) owns: the entire interest in a sole proprietorship more than 10% of either a capital or profits interest in a partnership, or more than 10% in value of either the voting or all stock of a corporation ERISA Title IV 4021(b)(9), 4021(d) 16

17 Combined Plan Limits IRC 404(a)(7) Attribution rules of IRC 1563 and 414(c) apply in determining ownership Under IRC 1563(e) An individual shall be considered as owning stock owned by his children who have not attained the age of 21 years, and, if the individual has not attained the age of 21 years, the stock owned by his parents Children not deemed to own the stock of their parents via above rules are not substantial owners and therefore could cause coverage 60-month rule basically requires child to be age 26 for this rule to cause coverage Combined Plan Limits IRC 404(a)(7) Consider carve out DB & 401(k) trying to avoid 404(a)(7) combined limit while allowing everyone to defer Recall IRC 404(n): Elective deferrals shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a) and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions. (emphasis added) 17

18 Combined Plan Limits IRC 404(a)(7) Employer sponsors DB plan & 401(k) PS plan Employees in DB plan eligible for just deferrals in 401(k) PS plan Other employees in 401(k) PS plan receive PS contributions (but are not in DB plan) i.e., absent deferrals no one benefits in both plans 2005 IRS/ASPPA Q&A #21 IRS indicated that the combined plan limit did not apply Of course it doesn t 404(n) controls BUT this requires conclusion that deferral only participants are NOT beneficiaries in DC plan And therefore comp. not considered in DC limit above PLR Partnership of P.C.s Plans of affiliated service groups treated as multiple employer plans [Prop. Reg (m)-3(c)] Multiple employer plans provide for separate deduction limit for each employer [IRC 413(c)(6)] Special election for plans in effective prior to

19 Small Medical Group P.C. 401(k) plan with CB plan Earnings Age DB Profit Sharing & SH Total Employer 401(k) Total Dr. A $ 255K 56 $ 63,150 $ 33,500 $ 96,650 $ 23,000 $ 119,650 Dr. B 255K 56 63,150 33,500 96,650 23, ,650 NHC1 15K ,050 1,350-1,350 NHC2 30K ,100 2,700-2,700 NHC3 30K ,100 2,700-2,700 NHC4 30K ,100 2,700-2,700 NHC5 30K ,100 2,700-2,700 NHC6 25K ,750 2,250-2,250 Tot $ 670K $120,000 $ 78,200 $207,700 $ 46,000 $ 253,700 Small Medical Group P.C. 401(k) plan with CB plan DC plan: 3% non-elective safe harbor 401(k) PLUS profit sharing as follows: Owners maximize NHCEs 4% of compensation DB plan: Cash balance plan with contribution credits as follows: Owners - $63,150 NHCEs - 2% of compensation Cost for employees $14,400 Employer total = 31% of compensation i.e. 31% of 670,000 = $207,700 19

20 Partnership of P.C.s 401(k) plan with CB plan Earnings Age DB Profit Sharing & SH Total Employer 401(k) Total Dr. A $ 255K 56 $ 45,550 $ 33,500 $ 79,050 $ 23,000 $ 102,050 Dr. B 255K 56 45,550 33,500 79,050 23, ,050 NHC1 15K ,050-1,050 NHC2 30K ,500 2,100-2,100 NHC3 30K ,500 2,100-2,100 NHC4 30K ,500 2,100-2,100 NHC5 30K ,500 2,100-2,100 NHC6 25K ,250 1,750-1,750 Tot $ 670K $ 94,300 $ 75,000 $169,300 $ 46,000 $ 215,300 Partnership of P.C.s 401(k) plan with CB plan DC plan: 3% non-elective safe harbor 401(k) PLUS profit sharing as follows: Owners max NHCEs 2% of compensation DB plan: Cash balance plan with contribution credits as follows: Owners - $45,550 NHCEs - 2% of compensation Cost for employees $11,200 P.C.s individually limited to 31% of compensation i.e. 31% of $255,000 = $79,050 20

21 Partnership of P.C.s - 401(k) plan with CB plan 6% PS for P.C.s Earnings Age DB Profit Sharing & SH Total Employer 401(k) Total Dr. A $ 255K 56 $185,000 15,300 $200,300 $ 23,000 $ 223,300 Dr. B 255K ,000 15, ,300 23, ,300 NHC1 15K ,500 1,800-1,800 NHC2 30K ,000 3,600-3,600 NHC3 30K ,000 3,600-3,600 NHC4 30K ,000 3,600-3,600 NHC5 30K ,000 3,600-3,600 NHC6 25K ,500 3,000-3,000 Tot $ 670K $373,200 $ 46,600 $419,800 $ 46,000 $ 465,800 Partnership of P.C.s - 401(k) plan with CB plan 6% PS for P.C.s DC plan: 3% non-elective safe harbor 401(k) PLUS profit sharing as follows: Owners 3% of compensation NHCEs 7% of compensation DB plan: Cash balance plan with contribution credits as follows: Owners - $185,000 NHCEs - 2% of compensation Cost for employees $19,200 P.C.s not limited to 31% of compensation P.C.s deduction for contribution to DC only 6% 21

22 DB Exception to Excise tax IRC 4972(c)(7) In determining the amount of nondeductible contributions for any taxable year, an employer may elect for such year not to take into account any contributions to a defined benefit plan OK, so, why would they not elect? And HOW do you elect? Year Deductible Plan contribution deemed made on last day of preceding taxable year if payment on account of such taxable year and made not later than due date for filing tax return for such taxable year (including extensions) 404(a)(6) 22

23 Year Deductible In order for 404(a)(6) to apply (allowing deduction in tax year prior to year of deposit): Contribution must be treated as a contribution actually received on last day of tax year would be treated; and No later than due date of tax return, employer either: designates payment in writing (to PA or trustee) as on account of employer s preceding taxable year ; or claims payment as deduction on tax return for preceding taxable year Revenue Ruling Year Deductible Note from above Contribution must be treated as a contribution actually received on last day of tax year would be treated This would seem to disallow prior year deduction for amounts contributed pursuant to post yearend corrective amendment under Reg (a)(4)-11(g) Further, from 1.401(a)(4)-11(g)(5) the amendment is not given retroactive effect for purposes of section

24 Year Deductible A payment may be designated as on account of preceding taxable year (as provided above) at any time on or before the due date (including extensions) of tax return for such year SO, where return first filed without taking deduction, amended return may be filed claiming deduction if filed before (extended) due date CONVERSELY, if deduction claimed on preceding year return for post year-end deposit, employer may not amend return to push deduction to current year Year Deductible Presume that: payment made within 8 ½ months after year-end treated as prior year deposit for 412 (minimum funding) not deducted on prior year tax return, and nothing in writing designates contribution is on account of prior tax year How about deposit made 10/15 (within 404(a)(6) period for Sole Prop) for calendar year plan? Can contribution be on account of one year for minimum funding purposes and another year for deduction purposes? 24

25 Year Deductible Revenue Ruling Taxpayer allowed to take deduction in 1975 for contribution made within 404(a)(6) period, but count for 412 (minimum funding) in 1976 ( 412 did not apply until years beginning after 1975) Service cited following language in Temp. Reg (c)-12(c)(2) (allowing 8½ month post yearend period to satisfy minimum funding in case of pension plans other than single employer DB plans): Year Deductible The rules of this section relating to the time a contribution is deemed made for purposes of section 412 are independent from the rules contained in section 404(a)(6) relating to the time a contribution is deemed made for purposes of claiming a deduction for such contribution under section 404. [Temp. Reg (c)-12(c)(2)] (emphasis added) 25

26 Year Deductible PLR : For 1988 company maintained three plans a money purchase plan, a PS plan and a DB plan Contributions to three plans exceeded 404(a)(7) limit Company wished to treat certain contributions to DB plan made after year-end but prior to extended due date of tax return (and minimum funding deadline) as 1988 contributions for 412 but as 1989 for 404 Citing Temp. Reg (c)-12(c)(2) and RR 77-82, Service allowed taxpayer to treat contributions in above manner Year Deductible Note that with contribution considered 404 contribution for subsequent year, limits of 404 for following year will apply and they will apply to all amounts designated as being on account of such subsequent year i.e., contribution is not added to following year s limit - it becomes deductible within such limit (Presumably) Reg (a)-14(d)(2)(i) will require that contribution be excluded from assets when determining deductible amounts for subsequent year 26

27 Year Deductible 2011 Greybook Q&A 7 A company has a calendar taxable year and sponsors a pension plan with a calendar plan year. Which of the following combinations are acceptable for a contribution made during the contribution grace period (January 1, 2011 to September 15, 2011)? a) Deduct in 2010, reflect on 2010 Schedule SB? b) Deduct in 2010, reflect on 2011 Schedule SB? c) Deduct in 2011, reflect on 2010 Schedule SB? d) Deduct in 2011, reflect on 2011 Schedule SB? Year Deductible 2011 Greybook Q&A 7 (cont) RESPONSE a), c), and d) are acceptable. IRC 404(a)(6) deems a contribution made after the last day of a taxable year to be made on the last day of a taxable year if the payment is made on account of such taxable year. A contribution is considered to be on account of the 2011 plan year when reported on the 2011 Schedule SB and thus cannot be deducted on the sponsor s 2010 tax return COMMENTARY TO FOLLOW 27

28 Year Deductible We respectfully disagree that (b) is not acceptable IRC 404(a)(6) and do not require contribution to be on account of preceding plan year They require it to be on account of preceding tax year As detailed above, there is plenty of authority (e.g. RR 77-82) providing that they can be different e.g. as in (c) where on 2010 SB but 2011 tax return If a contribution is within deductible limit for preceding year, and is made by due date of preceding year tax return, it should be deductible in preceding year irrespective of treatment for funding purposes Short Plan/Tax Years DC Plans DC plans allowed deduction of 25% of comp. of plan beneficiaries during employer s tax year Effect of short PY on deduction for contributions to DC plan varies depending following factors: Taxable year Are tax year and PY both being changed Does tax year = PY before change? Does tax year = PY after change? 28

29 Short Plan/Tax Years DC Plans Example Company has June 30 tax year-end PS plan also has June 30 year-end Effective January 1, 2014 tax-year changes to calendar year Short tax-year from 7/1/13-12/31/13 PYE changed at same time For short period 7/1/13-12/31/13 maximum deduction is 25% of participant compensation for this 6-month period Short Plan/Tax Years DC Plans Example Company has June 30 tax year-end 401(k) PS plan also has June 30 year-end Effective January 1, 2014 tax-year changes to calendar Short tax-year from 7/1/13-12/31/13 PYE not changed For short tax-year maximum deduction 25% of participant comp. for this 6-month period Contributions for PYE 6/30/14 deductible in short tax-year if made by (extended) due date of tax return But not matching contributions related to post 12/31/13 deferrals (Revenue Rulings ; ) 29

30 Short Plan/Tax Years DC Plans Example Company has June 30 tax year-end PS plan has December 31 year-end Effective July 1, 2013 PYE changed June 30 Short PY from 1/1/13-6/30/13 Tax-year not changed Will be two PYs ending during 6/30/13 tax-year 2012 calendar year and Short PY 1/1/13-6/30/13 Maximum deduction 25% of participant comp. for tax-year Short Plan/Tax Years DB Plans Rev. Proc Valid post PPA? Deductible amount when DB plan has short plan year resulting from a change in plan year If plan year change results in more than one plan year being associated with employer s taxable year (i.e., more than one plan year beginning or ending in tax year), or Total number of months of plan year or years associated with tax year different from number of months in tax year Deductible limit for tax year must be adjusted 30

31 Short Plan/Tax Years DB Plans Adjustment obtained by multiplying sum of deductible limits for associated PY(s) by fraction Numerator "t" = number of months in the tax year Denominator "p" = aggregate number of months in associated PY(s) Deductible limit for short PY determined by ratably reducing otherwise deductible limit for 12- month PY in proportion to number of months of short PY Short Plan/Tax Years DB Plans Example Employer with 1/1-12/31 tax year has historically based deductible limit for DB plan on basis of PY commencing October 1 within such calendar year In 2013 changed PY to calendar year Short PY 10/1/13-12/31/13 This is PY associated with 2013 calendar tax year Assume deductible limit for a full PY = $120,000 Pro rated = $30,000 ($120,000 * 3 / 12) Deductible limit for tax year is $120,000 Deductible limits for short plan year = $30,000, times t = 12, divided by p = 3 31

32 Short Plan/Tax Years DB Plans Example Same plan but in 2013 changed PY to PYE 11/30 Short PY 10/1/13-11/30/13 This PY is associated with 2013 calendar tax year As is PY 12/1/13-11/30/14 i.e. both begin in 2013 tax year Assume deductible limit for two month PY = $20,000 Assume deductible limit for PYE 11/30/12 = $190,000 Deductible limit for tax year is $180,000 Sum of deductible limits = $210,000, times t = 12, divided by p = 14 Short Plan/Tax Years DB Plans Example Calendar year employer adopts defined benefit plan with initial PY 1/1/13-11/30/13 Short year not result of change in PY Rev. Proc therefore does not apply (apparently) Second PY runs 12/1/13-11/30/14 Both PYs begin in 2013 tax year Can both years deduction be taken in 2013? It certainly has been done! 32

33 Short Plan/Tax Years DB Plans Short tax years Revenue Ruling valid post PPA? Deductible amount when DB plan has short tax year resulting from a change in tax year where limit based on PY beginning in tax year Where minimum funding amount is limit Prior funding deficiency (if any), plus Tax year ratio multiplied by sum of current charges and credits to FSA Tax year ratio = number of months in short tax year / 12 If other deductible limit utilized, limit for short tax year is product of deductible limit and tax year ratio Special rules apply for subsequent tax years Short Plan/Tax Years DB Plans Initial short tax years No pro-rating based on months in tax year Instead, reasonable compensation rules have been applied Private Letter Ruling Plastic Engineering & Manufacturing Co. (78 T.C June 30, 1982) Bianchi v. Commissioner, 66 T.C. 324 (1976), affd. without published opinion 553 F.2d 93 (2d Cir. 1977) LaMastro v. Commissioner, 72 T.C. 377 (1979) 33