Deposit of Employer Contribution

[Below Ground]

During 2007 Employer deposits $73,000 to a profit sharing plan's trust fund. The last deposit of the $73,000 was actually made on 12/31/2007, and was $11,000.

Review of allocation results cause the Employer to only wanting to allocate $62,000, not the $73,000 deposited.

Other points are: (1) the Maximum Deductible Amount is $81,000, and (2) there is no resolution or other documenation defining the Employer contribution to be $73,000.

What options exist? Can the Trust simply hold the "extra" $11,000 as advance contribution for 2008?

[J Simmons]

My understanding is that without a prior or contemporaneous designation for a different plan year, the contribution counts for the plan year in which actually made.

It is either an extreme coincidence or there is a reason that the $11,000 is the amount in question, is the amount of the difference and was made just one day before it could count for 2008 without any plan year designation. The reasons behind that might give indicia that it was intended for 2008 at the time it was made. You might be able to make a case from such indicia for there having been a de facto designation for 2008.

[Below Ground]

The story I got was that the $11,000 was sent to the broker with instructions (verbal) to deposit on January 1, 2008. The broker instead deposited on December 31.

The reason value are "coincidental" is that it was estimated that the amount needed to "max out" the owner would be slight more than $62K. The $11,000 was supposed to provide for the additional sum needed for this goal, with the balance being applied to 2008. The problem is that the deposit was made 1 day early. Now the amount that would have been for 2008 goes only to the "rank and file employees" as the owner is max out when slightly over $62K is allocated. Of course the owner is not happy, but I think that the entire $72,000 must be allocated in 2007 since the deposit was in 2007. Am I wrong?

[Bill Presson]

The story I got was that the $11,000 was sent to the broker with instructions (verbal) to deposit on January 1, 2008. The broker instead deposited on December 31.

The reason value are "coincidental" is that it was estimated that the amount needed to "max out" the owner would be slight more than $62K. The $11,000 was supposed to provide for the additional sum needed for this goal, with the balance being applied to 2008. The problem is that the deposit was made 1 day early. Now the amount that would have been for 2008 goes only to the "rank and file employees" as the owner is max out when slightly over $62K is allocated. Of course the owner is not happy, but I think that the entire $72,000 must be allocated in 2007 since the deposit was in 2007. Am I wrong?

I agree with you. He should have written the check on January 2, 2008.

[Below Ground]

Thanks for your reply Bill!