[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.404(a)-7]

[Page 442]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.404(a)-7  Pension and annuity plans; contributions in excess of 
limitations under section 404(a)(1); application of section 404(a)(1)(D).

    When contributions paid by an employer in a taxable year to or under 
a pension or annuity plan exceed the limitations applicable under 
section 404(a)(1) but otherwise satisfy the conditions for deduction 
under section 404(a) (1) or (2), then in accordance with section 
404(a)(1)(D), the excess contributions are carried over and are 
deductible in succeeding taxable years of the employer in order of time 
pursuant to the following rules:
    (a) In the case of a succeeding taxable year of the employer which 
ends with or within a taxable year of the pension trust during which it 
is not exempt under section 501(a), or, in the case of an annuity plan, 
during which it meets the requirements of section 404(a)(2), such excess 
contributions are deductible to the extent of the difference between the 
amount paid and deductible in such succeeding taxable year and the 
limitation applicable to such year under section 404(a)(1) (A), (B), or 
(C).
    (b) In the case of a succeeding taxable year of the employer which 
ends with or within a taxable year of the pension trust during which it 
is not exempt under section 501(a), or, in the case of an annuity plan, 
during which it does not meet the requirements of section 404(a)(2), or 
which ends after the trust or plan has terminated, such excess 
contributions are deductible to the extent of the limitation applicable 
to such year under section 404(a)(1)(C) (see paragraph (b) of Sec. 
1.404(a)-6).

The provisions of section 404(a)(1)(D) are to be applied before giving 
effect to the provisions of section 404(a)(7) for any year. The 
carryover provisions of section 404(a)(1)(D), before effect has been 
given to section 404(a)(7), may be illustrated by the following example 
for a plan put into effect in a taxable year ending December 31, 1954:

                    Taxable Year Ending Dec. 31, 1954
Amount of contributions paid in year........................    $100,000
Limitation applicable to year...............................      60,000
Amount deductible for year..................................      60,000
                                                             -----------
   Excess carried over to succeeding years..................      40,000
                                                             ===========

                    Taxable Year Ending Dec. 31, 1955

Amount of contributions paid in year........................     $25,000
Carried over from previous years............................      40,000
                                                             -----------
   Total deductible subject to limitation...................      65,000
Limitation applicable to year...............................      50,000
Amount deductible for year..................................      50,000
                                                             -----------
   Excess carried over to succeeding years..................      15,000
                                                             ===========

                    Taxable Year Ending Dec. 31, 1956

Amount of contributions paid in year........................     $10,000
Carried over from previous years............................      15,000
                                                             -----------
   Total deductible subject to limitation...................      25,000
Limitation applicable to year...............................      45,000
Amount deductible for year..................................      25,000
                                                             -----------
   Excess carried over to succeeding years..................        None



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