Deduction Timing

[amcorson]

I need the help of the experts here. I recently came across a cash balance plan design as follows:

1st Plan Year - 12/31/2009 - 12/30/2010

2nd Plan Year - 12/31/2010 - 12/31/2011

Company Fiscal Year = Calendar

The goal being to double up deductions for 2010. Example:

1st plan year $250,000 deposited after 2009 TR due date, so deducted on 2010 tax return.

2nd plan year $250,000 deposited by TR due date, also deducted on 2010 tax return.

I know if you make a contribution after the tax return due date it can be deducted the following year, but the 12/31 start date just seems wrong.

I also know for DB deductibility, you have to choose a method of which plan year to use and stick with it. The excuse here was the plan was not signed by the tax return due date so the ending year had to be used and it will normally be the beginning year and a resolution says as much. This may be the problem.

So basically they are trying to use the fact that the PY starts in 2009, 2010, etc to claim a deduction for that year. Just seems off to me.

Thanks

[K2retire]

It's been a few years (pre PPA) since I worked on DB plans, but we used to set them up with 9-30 plan year ends to accomplish the same thing for a caelndar year business.