[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(b)-1]

[Page 458]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.404(b)-1  Method of contribution, etc., having the effect of 
a plan; effect of section 404(b).

    Section 404(a) is not confined to formal stock bonus, pension, 
profit- sharing, and annuity plans, or deferred compensation plans, but 
it includes any method of contributions or compensation having the 
effect of a stock bonus, pension, profit-sharing, or annuity plan, or 
similar plan deferring the receipt of compensation. Thus, where a 
corporation pays pensions to a retired employee or employees or to their 
beneficiaries in such amounts as may be determined from time to time by 
the board of directors or responsible officers of the company, or where 
a corporation is under an obligation, whether funded or unfunded, to pay 
a pension or other deferred compensation to an employee or his 
beneficiaries, there is a method having the effect of a plan deferring 
the receipt of compensation for which deductions are governed by section 
404(a). If an employer on the accrual basis defers paying any 
compensation to an employee until a later year or years under an 
arrangement having the effect of a stock bonus, pension, profit-sharing, 
or annuity plan, or similar plan deferring the receipt of compensation, 
he shall not be allowed a deduction until the year in which the 
compensation is paid. This provision is not intended to cover the case 
where an employer on the accrual basis defers payment of compensation 
after the year of accrual merely because of inability to pay such 
compensation in the year of accrual, as, for example, where the funds of 
the company are not sufficient to enable payment of the compensation 
without jeopardizing the solvency of the company, or where the liability 
accrues in the earlier year, but the amount payable cannot be exactly 
determined until the later year.

[T.D. 6500, 25 FR 11690, Nov. 26, 1960]