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TITLE 26-INTERNAL REVENUE CODE SHORT TITLE Section 1 of Pub. L. 87-792 provided: "That this Act [enacting sections 405 and 6047 of this title, and amending sections 37, 62, 72, 101. 104, 105, 172, 401 to 404, 503, 805, 1361, 2039, 2517, 3306, 3401 and 7207 of this title) may be cited as the 'Self-Employed Individ- uals Tax Retirement Act of 1962'." SALARY REDUCTION REGULATIONS Section 2006 of Pub. L. 93-406, as amended by Pub. L. 94-455, title XV, § 1506, Oct. 4, 1976. 90 Stat. 1520, provided that: "(a) Inclusion of certain contributions in income-Except in the case of plans or arrangements in existence on June 27, 1974, a contribution made before January 1, 1978, to an employees' trust described in section 401(a), 403(a) or 405(a) of the Internal Revenue Code of 1954 [subsec. (a) of this section, section 403(a) of this title, or section 405(a) of this title] which is exempt from tax under section 501(a) of such Code [section 501(a) of this title], or under an arrangement which, but for the fact that it was not in existence on June 27, 1974, would be an arrangement described in :.ubsection (b)(2) of this section, shall be treated as a contribution made by an employee if the contribution is made under an arrangement under which the con- tribution will be made only if the employee elects to receive a reduction in his compensation or to forego an increase in his compensation. "(b) Administration in the case of certain qualified pension or profit-sharing plans, etc., in existence on June 27, 1974- No salary reduction regulations may be issued by the Secretary of the Treasury in final form before Janu- ary 1, 1978, with respect to an arrangement which was in existence on June 27, 1974, and which, on that date- "(1) provided for contributions to an employee's trust described in section 401(a), 403(a), or 405(a) of the Internal Revenue Code of 1954 Esubsee. (a) of this section, section 403(a) of this title, or section 405(a) of this title] which is exempt from tax under section 501(a) of such Code [section 501(a) of this title], or "(2) was maintained as part of an arrangement under which an employee was permitted to elect to receive part of his compensation in one or more al- ternative forms if one of such forms results in the inclusion of amounts in income under the Internal Revenue Code of 1954 [this title]. "(c) Administration of law with respect to certain plans- "(1) Administration in the case of plans described in sub. section (b)-Until salary reduction regulations have been issued in final form, the law with respect to plans or arrangements described in subsection (b) shall be administered- "(A) without regard to the proposed salary re- duction regulations (37 FR 25938) and without regard to any other proposed salary reduction reg- ulations, and "(B) in the manner in which such law was ad- ministered before January 1, 1972. "(2) Administration in the case of qualified profit-shar. Ing plans-In the case of plans or arrangements de- scribed in subsection (b), in applying this section to the tax treatment of contributions to qualified profit-sharing plans where the contributed amounts are distributable only after a period of deferral, the law shall be administered in a manner consistent with- "(A) Revenue Ruling 56-497 (1956-2 C.B. 284), "(B) Revenue Ruling 63-180 (1963-2 C.B. 189), and "(C) Revenue Ruling 68-89 (1968-1 C.B. 402). "(d) Limitation on retroactivity of final regulations-In the case of any salary reduction regulations which become final after December 31, 1977- "(1) for puropses of chapter 1 of the Internal Rev- enue Code of 1954 (relating to normal taxes and sur- taxes) [chapter 1 of this title], such regulations shall not apply before January 1, 1978; and "(2) for purposes of chapter 21 of such Code (relat- ing to Federal Insurance Contributions Act) [chap- ter 21 of this title] and for purposes of chapter 24 of such Code (relating to collection of income tax at source on wages) [chapter 24 of this title], such reg- ulations shall not apply before the day on which such regulations are issued in final form. "() Salary reduction regulations defined-For purpose of this section, the term 'salary reduction regulations' means regulations dealing with the Includibility in gross income (at the time of contribution) of amounts contributed to a plan which includes a trust that qualifies under section 401(a) [subsec. (a) of this sec- tion], or a plan described in section 403(a) or 405(a) [section 403(a) or 405(a) of this title], including plans or arrangements described in subsection (b)(2), If the contribution is made under an arrangement under which the contribution will be made only if the em- ployee elects to receive a reduction in his compensa- tion or to forego an Increase in his compensation, or under an arrangement under which the employee is permitted to elect to receive part of his compensation in one or more alternative forms (if one of such forms results in the inclusion of amounts in income under the Internal Revenue Code of 1954) [this title]." CRoss REFERENCES Constructive ownership of stock not applicable to employees' trust, see section 318 of this title. Denial of exemption to trusts engaged in prohibited transactions, see section 503 of this title. Partner or proprietor of unincorporated business en- terprise not considered employee under this section, see section 1361 of this title. Payments under section not wages for purposes of- Collection of income tax at source on wages, see section 3401 of this title. Federal Insurance Contributions Act, see section 3121 of this title. Federal Unemployment Tax Act, see section 3306 of this title. Returns by exempt organizations, see section 6033 of this title. SECTION REFERM TO IN OTHER SECTIONS This section is referred to in sections 37, 62, 72, 83, 101, 104, 105, 120, 172, 219, 220, 318, 382, 402 to 415, 501, 503, 511, 513, 542, 805, 871, 1348, 1379, 1492, 1563, 2039, 2517, 3121, 3306, 3401, 4941, 4972, 4975, 6033, 6043, 6047, 6058, 6104, 6324, 7476 of this title; title 15 sections 77c, 78c, 78, 80a-3; title 29 sections 1053. 1082, 1103, 1107, 1108, 1132, 1301, 1321, 1322, 1344; title 42 section 409; title 45 section 702. § 402. Taxability of beneficiary of employees' trust (a) Taxability of beneficiary of exempt trust (1) General rule Except as provided in paragraphs (2) and (4), the amount actually distributed or made available to any distributee by any employees' trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to him, in the year in which so dis- tributed or made available, under section 72 (relating to annuities). The amount actually distributed or made available to any distribu- tee shall not include net unrealized apprecia- tion in securities of the employer corporation attributable to the amount contributed by the employee. Such net unrealized apprecia- tion and the resulting adjustments to basis of such securities shall be determined in accor- dance with regulations prescribed by the Sec- retary. (2) Capital gains treatment for certain distributions In the case of an employee trust described in section 401(a), which is exempt from tax § 402 Page 296