Page:United States Statutes at Large Volume 83.djvu/683

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

655

it is an electing small business corporation may not inure to the benefit of any individual who is a shareholder-employee for such taxable year. A plan shall be considered as satisfying the requirement of this subsection for the period beginning with the tirst day of a taxable year and ending with the 15th day of the third month following the close of such taxable year, if all the provisions of the plan which are necessary to satisfy this requirement are in effect by the end of such period and have been made effective for all purposes with respect to the whole of such period. "(b)

TAXAmi.ITY OF SirAREIIOU)ER-E>IlM.OYEE B E X E F I C I A R I E S. " (1) IX"CLI'SION OF EXCESS COXTRIHUTIOXS IX (IROSS IXCOME.

Notwithstanding the provisions of section 402 (relating to tax- ^^ "^*^ '*°2. ability of beneficiary of employees' trust), section 403 (relating ^ " f e, pp. 591, to taxation of employee anmiities), or section 405(d) (rehiting to taxability of beneficiaries luuler (pialified bond purcliase plans), an individual who is a shareholder-employee of an electing small business corporation shall include iri gross income, for his taxable year in which or with which the taxable year of the corporation ends, the excess of the amount of contributions paid on his behalf which is deductible under section 404(a)(1), (2), or (3) by the corporation for its taxable year over the lesser of— " (A) 10 percent of the compensation received or accrued by him from such corporation during its taxable year, or " (B) $2,500. "(2)

TREA'J-:MEXT OF A:MOUNTS IXCEUDED IN (JROSS IXCO^IE.—Any

amount included in the gross income of a shareholder-employee under paragraph (1) shall be treated as (onsideration for the contract contributed by the shareholder-employee for purposes of section 72 (relating to annuities). 68A Stat. 20. "(3) I)EDi'("rix FOR A:S[01"XTS NOT RECEIVED AS HEXEFTTS.—If— " (A) amounts are included in the gross income of an individual under paragraph (l), and " (B) the rights of such individual (or his beneficiaries) under the plan terminate before payments under the plan which are excluded from gross income equal the amounts included in gross income under paragraph (1), then there slujll be allowed as a deduction, for the taxable year in which such rights terminate, an amount equal to the excess of the amounts included in gross income under paragraph (1) over such payments. "(c) CAFtRYOVER OF A:\rUNTS DEDUCTIBLE.—Ko aiuouiit deductible shall be carried forward under the second sentence of section 404(a) (3)(A) (relating to limits on deductible contributions under stock bonus and profit-sharing trusts) to a taxable year of a corporation with respect to which it is not an electing small business corporation from a taxable year (beoinning after December 31, 1970) with respect to which it is an electing small business corporation. " (d) SIIAREIIOEDER-EMPLOYEE.—For purposes of this section, the term 'shareliolder-employee' means an employee or officer of an electing small business corporation who owns (or is considered as owning within the meaning of section 318(a)(1), on any day during the taxable year of such corporation, more than 5 percent of the outstanding stock of the corporation." (b) CONFORMING X\>IENDIMENT.—Section 62 (relating to adjusted ^SA Stat. 17; gross income defined) is amended by inserting after paragraph (8) the ^^ ^'^'' ^^' following new paragraph: "(9)

PENSION,

ETC.,

FLANS

OF

ELECTING

SMALL

BUSINESS

CORPORATIONS.—The deduction allowed by section 1379(b)(3)."

supra.

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