IRS CCA: Outlay-of-Assets Test Determines If Employer Contribution Is Deductible for Taxable Year Contribution Is Made (IRC §404)

For a contribution by an employer to the trust of a qualified retirement plan maintained by the employer to be deductible under tax code Section 404(a) for the employer’s taxable year in which the contribution is made, the contribution must be a payment of cash (or its equivalent) or property to the trust, the Chief Counsel’s Office advised. The Chief Counsel’s Office stated that whether a contribution is paid for purposes of Section 404(a) is determined under the two-part objective outlay-of-assets test. First, the employer must experience an outlay of, or reduction in, its assets when the contribution ...