[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: 26CFR1.405-2]

[Page 470-471]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.405-2  Deduction of contributions to qualified bond purchase plans.

    (a) In general. An employer shall be allowed a deduction for 
contributions paid to or under a qualified bond purchase plan in the 
same manner and to the same extent as if such contributions were made to 
a trust described in section 401(a) which is exempt from tax under 
section 501(a). A deduction will be allowed only for the taxable year in 
which the contributions are paid, or treated as paid, except as provided 
by section 404(a) (1), (3), and (7). For purposes of the deduction, a 
contribution is paid at the time the application for the bond is made 
and the full purchase price paid.
    (b) Rules for applying section 404. If a qualified bond purchase 
plan is designed as a pension plan as defined in paragraph (b)(1)(i) of 
Sec. 1.401-1, the limitations of section 404 applicable to qualified 
pension trusts shall apply. See Sec. Sec. 1.404(a)-3 through 1.404(a)-
7. Similarly, if a qualified bond purchase plan is designed as a profit-
sharing plan as defined in paragraph (b)(1)(ii) of Sec. 1.401-1, the 
limitations of section 404 applicable to qualified profit-sharing trusts 
shall apply. See Sec. Sec. 1.404(a)-9 and 1.404(a)-10. In addition, if 
a qualified bond purchase plan designed as a pension plan covers some or 
all of the employees who are covered by a qualified profit-sharing plan 
established and maintained by the same employer, or if a qualified bond 
purchase plan which is designed as a profit-sharing plan covers some or 
all the employees who are also covered by a qualified pension or annuity 
plan established and maintained by the same employer, section 404(a)(7) 
is applicable. See Sec. 1.404(a)-(13). Furthermore, if a qualified bond 
purchase plan covers employees some or all of whom are employees within 
the meaning of

[[Page 471]]

section 401(c)(1), the provisions of section 404(a) (8), (9), and (10) 
and 404(e) shall also apply.
    (c) Accrual method taxpayers. In the case of a taxpayer using the 
accrual method of accounting, a contribution to a qualified bond 
purchase plan will be deemed paid on the last day of the year of accrual 
if--
    (1) During the taxable year of accrual the taxpayer incurs a 
liability to make the contribution, the amount of which is accruable 
under section 461 for such taxable year, and
    (2) Payment is in fact made no later than the time prescribed by the 
law for filing the return for the taxable year of accrual (including 
extensions thereof).

[T.D. 6675, 28 FR 10131, Sept. 17, 1963]