Page 309

TITLE 26-INTERNAL REVENUE CODE ticipates only if separate accounts are ma n- tained for each employee. (6) Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding tax- able year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including exten- sions thereof). (7) Limit on deductions If amounts are deductible under paragraphs (1) and (3), or (2) and (3), or (1), (2), and (3), in connection with two or more trusts, or one or more trusts and an annuity plan, the total amount deductible In a taxable year under such trusts and plans shall not exceed the greater of 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries of the trusts or plans, or the amount of contributions made to or under the trusts or plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 for the plan year which ends with or within such taxable year (or for any prior plan year). In addition, any amount paid into such trust or under such annuity plans in any taxable year in excess of the amount allowa- ble with respect to such year under the pre- ceding provisions of this paragraph shall be deductible in the succeeding taxable years in order of time, but the amount so deductible under this sentence in any one such succeed- ing taxable year together with the amount al- lowable under the first sentence of this para- graph shall not exceed 25 percent of the com- pensation otherwise paid or accrued during such taxable years to the beneficiaries under the trusts or plans. This paragraph shall not have the effect of reducing the amount other- wise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than one trust or a trust and an annuity plan. (8) Self-employed individuals In the case of a plan included in paragraph (1), (2), or (3) which provides contributions or benefits for employees some or all of whom are employees within the meaning of section 401(c)(1), for purposes of this section- (A) the term "employee" includes an indi- vidual who is an employee within the mean- ing of section 401(c)(1), and the employer of such individual is the person treated as his employer under section 401(c)(4); (B) the term "earned income" has the meaning assigned to it by section 401(c)(2); (C) the contributions to such plan on behalf of an individual who is an employee within the meaning of section 401(c)(1) shall be considered to satisfy the conditions of section 162 or 212 to the extent that such contributions do not exceed the earned income of such individual derived from the trade or business with respect to which such plan is established, and to the extent that such contributions are not allocable (determined in accordance with regulations prescribed by the Secretary) to the pur- chase of life, accident, health, or other in- surance; and (D) any reference to compensation shall, in the case of an individual who is an em- ployee within the meaning of section 401(c)(1), be considered to be a reference to the earned income of such individual de- rived from the trade or business with re- spect to which the plan is established. (9) Plans benefiting self-employed individuals In the case of a plan included in paragraph (1), (2), or (3) which provides contributions or benefits for employees some or all of whom are employees within the meaning of section 401(c)(1)- (A) the limitations provided by para- graphs (1), (2), (3), and (7) on the amounts deductible for any taxable year shall be computed, with respect to contributions on behalf of employees (other than employees within the meaning of section 401(c)(1)), as if such employees were the only employees for whom contributions and benefits are provided under the plan; (B) the limitations provided by para- graphs (1), (2), (3), and (7) on the amounts deductible for any taxable year shall be computed, with respect to contributions on behalf of employees within the meaning of section 401(c)(1)- (i) as if such employees were the only employees for whom contributions and benefits are provided under the plan, and (ii) without regard to the second sen- tence of paragraph (3); and (C) the amounts deductible under para- graphs (1), (2), (3), and (7), with respect to contributions on behalf of any employee within the meaning of section 401(c)(1), shall not exceed the applicable limitation provided in subsection (e). (b) Method of contributions, etc., having the effect of a plan If there is no plan but a method of employer contributions or compensation has the effect of a stock bonus, pension, profit-sharing, or annu- ity plan, or similar plan deferring the receipt of compensation, subsection (a) shall apply as if there were such a plan. (c) Certain negotiated plans If contributions are paid by an employer- (1) under a plan under which such contribu- tions are held in trust for the purpose of paying (either from principal or income or both) for the benefit of employees and their families and dependents at least medical or hospital care, or pensions on retirement or death of employees; and (2) such plan was established prior to Janu- ary 1, 1954, as a result of an agreement be- tween employee representatives and the Gov- ernment of the United States during a period of Government operation, under seizure powers, of a major part of the productive fa- cilities of the industry in which such employ- er is engaged, such contributions shall not be deductible under this section nor be made nondeductible by this section, but the deductibility thereof 71-999 0 - 78 - 22 (Vol. 7) Page 309