Page 291

TITLE 26-INTERNAL REVENUE CODE menced) will, within 5 years after his death (or the death of his surviving spouse), be dis- tributed, or applied to the purchase of an im- mediate annuity for his beneficiary or benefi- ciaries (or the beneficiary or beneficiaries of his surviving spouse) which will be payable for the life of such beneficiary or beneficia- ries (or for a term certain not extending beyond the life expectancy of such beneficia- ry or beneficiaries) and which will be immeJi- ately distributed to such beneficiary or bene- ficiaries. The preceding sentence shall not apply if distribution of the interest of an owner-employee has commenced and such dis- tribution is for a term certain over a period permitted under subsection (a)(9)(B )(ii). [(8) Repealed. Pub. L. 93-406, title II, § 2001(e)(2), Sept. 2, 1974, 88 Stat. 954.) (9)(A) If the plan provides contributions or benefits for an owner-employee who controls, or for two or more owner-employees who to- gether control, the trade or business with re- spect to which the plan is established, and who also control as an owner-employee or as owner-employees one or more other trades or businesses, such plan and the plans estab- lished with respect to such other trades or businesses, when coalesced, constitute a single plan which meets the requirements of subsec- tion (a) (including paragraph (10) thereof) and of this subsection with respect to the em- ployees of all such trades or businesses (in- cluding the trade or business with respect to which the plan intended to qualify under this section is established). (B) For purposes of subparagraph (A), an owner-employee, or two or more owner-em- ployees, shall be considered to control a trade or business if such owner-employee, or such two or more owner-employees together- (I) own the entire interest in an unincor- porated trade or business, or (ii) in the case of a partnership, own more than 50 percent of either the capital inter- est or the profits interest in such partner- ship. For purposes of the preceding sentence, an owner-employee, or two or more owner-em- ployees, shall be treated as owning any inter- est in a partnership which is owned, directly or indirectly, by a partnership which such owner-employee, or such two or more owner- employees, are considered to control within the meaning of the preceding sentence. (10) The plan does not provide contribu- tions or benefits for any owner-employee who controls (within the meaning of paragraph (9)(B)), or for two or more owner-employees who together control, as an owner.employee or as owner-employees, any other trade or business, unless the employees of each trade or business which such owner-employee or such owner-employees control are included under a plan which meets the requirements of subsection (a) (including paragraph (10) thereof) and of this subsection, and provides contributions and benefits for employees which are not less favorable than contribu- tions and benefits provided for owner-employ- ees under the plan. (11) Under the plan, contributions on behalf of any owner-employee may be made only with respect to the earned income of such owner-employee which is derived from the trade or business with respect to which such plan is established. (e) Contributions for premiums on annuity, etc., con- tracts A contribution by the employer on behalf of an owner-employee is described in this subsec- tion if- (1) under the plan such contribution is re- quired to be applied (directly or through a trustee) to pay premiums or other consider- ation for one or more annuity, endowment, or life insurance contracts on the life of such owner-employee issued under the plan, (2) the amount of such contribution exceeds the amount deductible under section 404 with respect to contributions made by the employ- er on behalf of such owner-employee under the plan, and (3) the amount of such contribution does not exceed the average of the amounts which were deductible under section 404 with re- spect to contributions made by the employer on behalf of such owner-employee under the plan (or which would have been deductible if such section had been in effect) for the first three taxable years (A) preceding the year in which the last such annuity, endowment, or life insurance contract was issued under the plan, and (B) in which such owner-employee derived earned income from the trade or busi- ness with respect to which the plan is estab- lished, or for so many of such taxable years as such owner-employee was engaged in such trade or business and derived earned income therefrom. In the case of any individual on whose behalf contributions described in paragraph (1) are made under more than one plan as an owner- employee during any taxable year, the preced- ing sentence does not apply if the amount of such contributions under all such plans for all such years exceeds $7,500. Any contribution which is described in this subsection shall, for purposes of section 4972(b), be taken into ac- count as a contribution made by such owner- employee as an employee to the extent that the amount of such contribution is not deductible under section 404 for the taxable year, but only for the purpose of applying section 4972(b) to other contributions made by such owner-em- ployee as an employee. (f) Certain custodial accounts and contracts For purposes of this title, a custodial account, an annuity contract, or a contract (other than a life, health or accident, property, casualty, or li- ability insurance contract) issued by an insur- ance company qualified to do business in a State shall be treated as a qualified trust under this section if- (1) the custodial account or contract would, except for the fact that it is not a trust, con- stitute a qualified trust under this section, and (2) in the case of a custodial account the assets thereof are held by a bank (as defined in subsection (d)(1)) or another person who demonstrates, to the satisfaction of the Secre- tary, that the manner in which he will hold Page 291