What happens to the non-deductible amounts under the 412 limitation?

[Guest Gary A. Luing]

I am still floundering! I have received several opinions on my dilemma, but no citations or authority. What is needed, of course, is a Code Section, Reg, RR or case–but something.

Here is the fact pattern. Sole practitioner has retired so little or no income is generated on Sched C. The DB plan is underfunded just before termination, so $80,000 is required to be funded but is not deductible under 404(a)(8)© because of the income limitation. The $80,000 represents the final contribution under the minimum funding standards of 412 for the year of termination. The Code and the Regs specify what cannot be deducted, but not what happens to the amounts that are required but not deductible.

Is the non-deductible amount carried forward, or does it become a basis in the assets in the trust, or is it lost forever?