Installing a db plan for 2001

[Gary]

a self employed person learned after the completion of 2001 that he is in a good position to implement a db plan for 2001.

I am not sure if one needs to have a signed plan document by 12/31/2001 or a summary of the primary plan provisions in place. I have heard of some situation where having the basic plan provisions in place was sufficient. I don't know if this is that situation.

Any comments or suggestions?

[Guest Keith N]

I tell my clients/prospective clients that at the very least they need a Corp. resolution adopting the plan and a Trust established (usually checking account in the name of the Plan w/ $1,000 in it) PRIOR to the end of the Fiscal year to which the deduction will apply. I also strongly recommend that they have a signed Plan Document in place prior to the end of year.

I think your self employed person is SOL, unless you want to find a "less then reputable" attorney to "find" some resolutions, but without an established trust, I think you are really asking for trouble.

[AndyH]

He has until 4/15/02 to establish a SEP for 2001. Anything else is less than legit, and I think it's fair to say few people if any would touch it. Nobody I've worked with or for would.

[Alonzo]

Without a trust (and trust document) in place, there's no deduction available for the individual. This is true, even if there were board resolutions or even a plan document that has been properly drafted and adopted.

[Medusa]

I agree that Gary's client is probably SOL, but I did want to clarify some statements about the existence of the trust. In the olden days, for a valid deduction to exist, the corpus had to be established before the end of the tax year.

However I believe that Rev. Rul. 81-114 made it clear that this was not necessary. If there if some evidence to the contrary, please enlighten me!

[Alonzo]

You need the trust to be in existance. You do not have to have money in it. That is my memory.

[Medusa]

Alonzo: I agree that a trust instrument must be established, but not necessarily a trust corpus. At least according to the revenue ruling.