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Sue B

Contribution and deduction with midyear merger

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I have one small organization, Company A, that merged with 4 other organizations for a new controlled group company NewCo effective 2/1/2020. Company A has a cash balance plan, and as of 12/31/2020, Company As cash balance plan will be terminated, and NewCo will have a CB plan for the whole CG as of 1/1/2021.

Company A would like a full accrual for 2020, resulting in a 120k contribution. They are doing their 1/1-2/1 short tax year filing now, and wanted to know how to put the contribution on there if it hasn't been made yet. My thought is on the final 2020 filing, they change the plan sponsor to NewCo on Line 4, put all of the 2020 PY contributions on the SB, Company A pays all of the contributions, and NewCo allocates the deductions to them within their financials. Does that sound accurate? If they've made any contributions to date, could those be deducted on the short tax year filing?

Thanks for any help!

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I think we need more information.  Was the merger a stock sale, or asset sale?  Did NewCo purchase Company A's stock, or just the assets?  I assume stock sale since if you are doing a short year tax filing, Company A ceased to exist on 2/1?  If that is true, than Company A's cash balance plan now belongs to NewCo. for YE 12/31/20, so the deduction is theirs?  

 

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True, Company A ceased to exist on 2/1. 9 companies all merged together to create NewCo, and each of the 9 will continue to be responsible for their own cash flow, with the results rolling up into a consolidated financial statement. So NewCos financials are going to be the sum of 9 separate financials. NewCo would need to be the sponsor due to controlled group rules, but Company A could be responsible for the contribution and could be allocated the corresponding deduction?

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