Page:United States Statutes at Large Volume 88 Part 1.djvu/1000

 956 26 USC 401.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

owner-employees (within the meaning of section 401(c)(3)), is the sum of— " (A) the excess (if any) of— " (i) the amount contributed under the plan by each owner-employee (as an employee) for the taxable year, over "(ii) the amount permitted to be contributed by each owner-employee (as an employee) for such year, and " (B) the amount determined under this paragraph for the preceding taxable year of the employer, reduced by the excess (if any) of the amount described in subparagraph (A) (ii) over the amount described in subparagraph (A)(i). "(3) DEFINED BENEFIT PLANS.—The amount determined under this paragraph, in the case of a defined benefit plan, is the amount contributed under the plan by the employer during the taxable year or any prior taxable year beginning after December 31, 1975, if— " (A) as of the close of the taxable year, the full funding limitation of the plan (determined under section 412(c)(7)) is zero, and " (B) such amount has not been deductible for the taxable year or any prior taxable year. "(4) DEFINED CONTRIBUTION PLANS.—The amount determined under this paragraph, in the case of a plan other than a defined benefit plan, is the portion of the amounts contributed under the plan by the employer during the taxable year and each prior taxable year beginning after December 31, 1975, which has not been deductible for the taxable year or any prior taxable year. "(5) CORRECTING DISTRIBUTION.—For purposes of this subsection the term 'correcting distribution' means— " (A) in the case of a contribution made by an owneremployee as an employee, regardless of the type of plan, the amount determined under paragraph (2) distributed to the owner-employee who contributed such amount, " (B) in the case of a defined benefit plan, the amount determined under paragraph (3) which is distributed from the plan to the employer, and " (C) in the case of a defined contribution plan, the amount determined under paragraph (4) which is distributed from the plan to the employer or to the employee to the account of whom the amount described was contributed. "(c)

AMOUNT

PERMITTED

To

BE

CONTRIBUTED

BY

OWNER-

EMPLOYEE.—For purposes of subsection (b)(2), the amount permitted to be contributed under a plan by an owner-employee (as an employee) for any taxable year is the smallest of the following: "(1) $2,500, "(2) 10 percent of the earned income (as defined in section 401(c)(2)) for such taxable year derived by such owneremployee from the trade or business with respect to which the plan is established, or "(3) the amount of the contribution which would be contributed by the owner-employee (as an employee) if such contribution were made at the rate of contributions permitted to be made by employees other than owner-employees. I n any case in which there are no employees other than owneremployees, the amount determined under the preceding sentence shall be zero.

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