404 Deduction - Audit CAP

[justanotheradmin]

Money purchase plan, going through Audit CAP.

Plan Sponsor thought the plan was frozen, auditor says no, --> large make up contributions required.

The plan sponsor doesn't mind putting the money in, just wants to know if it is deductible as a business expense. It far exceeds the regular deduction limit. All of the make up money is for 2014 and earlier.

there is a bit of lost earnings as well that the auditor is requiring. I realize the lost earnings may not be deductible at all.

this is all separate from the sanction, which is minimal and the employer isn't concerned amount.

I'm not gleaning any special insight from Rev Proc 2012-13, Nor Treas. Reg 1.404. Perhaps I'm not reading them close enough.

Rev. Proc 2012-13

"(b) A corrective allocation to a participant's account because of a failure to make a required allocation in prior limitation year is not considered an annual addition respect to the participant for the limitation year in which the correction is made,but is considered in an annual addition for the limitation year to which the corrective allocation relates. However, the normal rules for §404, regarding deductions, apply."

I don't care about annual additions, those are fine. Just about the deduction.

Since the deposit is occurring right now, and it is required under §412(a) I feel like it should be deductible but I have nothing specific on point?

Can anyone help?

[jpod]

Will the closing agreement waive liability for the minimum funding excise tax? Be careful before you settle this case.