Instructions For Form 5330 November 2002 (Page 4 of 8) in pdf

•

governmental plans and certain plans

The sum of the amount of

The tax is 100% of the disqualified

maintained by tax-exempt

contributions described in sections

benefit.

organizations.

401(m)(4)(A) and 402(g)(3)(A), or

•

Generally, a “disqualified benefit” is

Contributions to a SIMPLE 401K or a

The nondeductible contributions are

any of the following:

SIMPLE IRA that are considered

•

computed as of the end of the

Any post-retirement medical benefit

nondeductible because they are not

or life insurance benefit provided for a

employer’s tax year. The current year

made in connection with the employer’s

key employee unless the benefit is

nondeductible contributions are equal

trade or business.

provided from a separate account

to the amount contributed during the

The combined plan deduction limits

established for the key employee under

employer’s tax year over the amount of

are first applied to contributions to the

section 419A(d);

contributions allowable as a deduction

defined benefit plan then to defined

•

Any post-retirement medical or life

under section 404. In addition, prior

contribution plans.

insurance benefit unless the plan meets

year nondeductible contributions

the nondiscrimination requirements of

continue to be subject to this tax

Part III (Section 4973(a)(3))

section 505(b) for those benefits; or

annually until eliminated by either

•

Any portion of the fund that reverts to

distributions to the employer of the

Tax on Excess Contributions to

the benefit of the employer.

amount of nondeductible contributions,

Section 403(b)(7)(A) Custodial

or a carryforward deduction in years

Accounts

Part V (Sections 4978, 4978A

after the nondeductible contributions

are made.

and 4978B)

Line 14. Reduce total current year

contributions by contributions to a Roth

Note. Although pre-1987

IRA and by any rollover contributions

Tax on Certain ESOP

nondeductible contributions are not

described in sections 402(c), 403(a)(4),

Dispositions

subject to this excise tax, they are

403(b)(8) or 408(d)(3).

taken into account to determine the

Caution. Section 4978A does not

extent to which post-1986 contributions

Line 15. The amount excludable for

apply to the estate of a person who

are deductible. See section 4972 and

your tax year is the smaller of the

died after December 19, 1989. Section

Pub. 560, Retirement Plans for Small

exclusion allowance or the annual

4978B does not apply to the disposition

Business, for details.

employer contribution limitation. Figure

of employer securities to which former

the amount to enter on line 15

section 133 applied which are acquired

Defined benefit plans exception.

according to the following steps:

by loans after August 20, 1996, or to

Generally, contributions up to the

the refinancing of such loans after

current unfunded liability of a defined

Step 1. Multiply the compensation

August 20, 1996.

benefit plan are deductible, regardless

received during the tax year from your

of the number of participants in the

employer that was included in gross

Line 24a. Report the section 4978 or

plan. In addition, when determining the

income by 20%.

section 4978A tax on line 24a. Check

amount of nondeductible contributions

the box on line 24a to show which tax

Step 2. Multiply the amount in step 1

for any tax year, an employer may

you are reporting.

by the number of years of service as of

elect, for that tax year, not to include

the end of the tax year for the tax year

Section 4978 imposes an excise

any contributions to a defined benefit

you are computing this exclusion

tax on dispositions of securities

plan except to the extent they exceed

allowance.

acquired in a sale to which section

the full-funding limitation (as defined in

1042 applied or in a qualified gratuitous

Step 3. Add all of the amounts

section 412(c)(7), determined without

transfer to which section 664(g)

contributed by your employer in

regard to section 412(c)(7)(A)(i)(I)).

applied, if the dispositions take place

previous years that were not included in

When determining the amount of

within 3 years after the date of the

your gross income.

nondeductible contributions, the

acquisition of the qualified securities (as

deductible limits under section

Step 4. Subtract step 3 from step 2.

defined in section 1042(c)(1) or a

404(a)(7) must be applied first to

Step 5. Enter the smaller of $40,000

section 664(g) transfer). The tax is 10%

contributions to defined contribution

(see the note below), or 100% of the

of the amount realized on the

plans and then to contributions to

compensation you received during the

disposition of the qualified securities if

defined benefits plan. This election

tax year.

an ESOP or eligible worker-owned

applies to terminated and ongoing

cooperative (as defined in section

plans. An employer making this election

Step 6. Enter the smaller of step 4 or

1042(c)(2)) disposes of the qualified

cannot also benefit from the exceptions

step 5 on line 15, Part III of Form 5330.

securities within the 3-year period

for terminating plans and for certain

Note. The $40,000 limitation in effect

described above, and either of the

contributions to defined contribution

under section 415(c)(1)(A) is subject to

following applies:

plans under section 4972(c)(6).

•

changes in the cost-of-living as

The total number of shares held by

described in section 415(d). Currently,

Defined contribution plans

that plan or cooperative after the

the dollar limit for a calendar year as

exception. Employer contributions to

disposition is less than the total number

adjusted annually for cost-of-living

one or more defined contribution plans

of employer securities held immediately

increases is published during the fourth

that are nondeductible because they

after the sale, or

•

quarter of the prior calendar year in the

exceed the combined plan deduction

Except to the extent provided in

Internal Revenue Bulletin.

limits of section 404(a)(7), are not

regulations, the value of qualified

subject to the 10% excise tax to the

securities held by the plan or

Part IV (Section 4976)

extent the contributions do not exceed

cooperative after the disposition is less

the greater of:

than 30% of the total value of all

•

Tax on Disqualified Benefits for

6% of compensation (within the

employer securities as of the

Funded Welfare Plans

meaning of section 404(a) and as

disposition (60% of the total value of all

adjusted under section 404(a)(12)) paid

Section 4976 imposes an excise tax on

employer securities in the case of any

or accrued (during the tax year in which

employers who maintain a funded

qualified employer securities acquired

the contributions were made) to

in a qualified gratuitous transfer to

welfare benefit plan that provides a

beneficiaries under plans, or

disqualified benefit during any tax year.

which section 664(g) applied).

-4-

Instructions For Form 5330 November 2002 Page 4

Related Articles

Related forms

Related Categories