"Valid" extension for contribution deadline

[Jim Norman]

A few years back there was a case reported where IRS had disallowed a plan contribution deduction where the employer had filed their tax return prior to March 15, then realized they needed more time to make their contribution, so filed a 7004 by March 15 requesting an extension. IRS denied, saying extension was invalid because the return had already been filed. I've tried but been unable to find a cite for this which would be handy to have. Does anybody recall this and have a cite?

My client's situation is different. Client's CPA filed the 7004 two weeks ago as the client needs more time to fund the plan for 2010. CPA then finished up the tax return and sent it to client. Client, not thinking about the plan contribution went ahead and filed the 1120 return on 3/11. Question - does the client have until 3/15 or 9/15 to fund the plan contribution and qualify for a deduction for 2010?

It seems to me, unlike the first situation, my client's extension should be valid, it was filed timely prior to the due date of the return, and the return had not yet been filed. Merely filing the return by 3/15 should not invalidate the extension. I'd like to get the cite to that other situation as I recall the specific reason IRS gave for disallowing was that the extension was filed after the return was filed.

[Bird]

All I can say is I think you're right; filing the return after getting the extension shouldn't invalidate the extension. I'd typically be hoping that someone like you would have the cite!

[Belgarath]

Try Revenue Ruling 66-144. And I agree with you and Bird, you should be all set in the situation you describe.

P.S. here's the text of the RR:

Pension Rulings and Other Documents,Rev. Rul. 66-144, 1966-1 CB 91. [Amplified by Rev. Rul. 84-18 at ¶19,651.],Internal Revenue Service, (Jan. 1, 1966)

Where a corporation on the accrual method of accounting has obtaining an extension of time for filing its income tax return, a contribution paid to its qualified employees' trust within such extended period for filing will be deemed to be timely regardless of when the return is actually filed.

Advice has been requested concerning the time allowable for a corporation on the accrual method of accounting to make a contribution to its qualified employees' trust for a taxable year for which the corporation has obtained an extension of time filing its income tax return.

A corporation, on an accrual method of accounting, established an employees' trust which is qualified under section 401(a) of the Internal Revenue Code of 1954. Following the close of its calendar taxable year, the corporation obtained an automatic extension of 3 months for filing its income tax return as provided by section 6081(b) of the Code. Subsequently, but before March 15, the corporation filed its income tax return and paid all tax due thereon. Its contribution to the employees' trust was made on June 1.

Section 404(a)(6) of the Code provides that for purposes of deductions for contributions under qualified stock bonus, pension, profit-sharing, or annuity plans, a taxpayer using the accrual method of accounting shall be deemed to have made payment on the last day of the year of accrual, if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year, including extensions thereof.

Section 404(a)(6) of the Code provides that a contribution for a taxable year made by a taxpayer reporting on the accrual basis shall be deemed to be made within such taxable year if paid within the time prescribed for filing its return plus any extension of time in which to file. Therefore, a contribution paid within an extended filing period is deemed to have been made during the taxable year. Thus, a contribution made during such extended period, as provided for under section 6081(b) of the Code, is deemed to have been made during the taxable year regardless of when the return is filed.

Accordingly, the contribution made by the taxpayer in the instant case will be deemed to have been timely made for purposes of section 404(a)(6) of the Code.