§4973 — Tax on excess contributions to certain tax-favored accounts and annuities
57 cases·13 followed·8 distinguished·36 cited—23% support
Statute Text — 26 U.S.C. §4973
In the case of—
an individual retirement account (within the meaning of section 408(a)),
an Archer MSA (within the meaning of section 220(d)),
an individual retirement annuity (within the meaning of section 408(b)), a custodial account treated as an annuity contract under section 403(b)(7)(A) (relating to custodial accounts for regulated investment company stock),
a Coverdell education savings account (as defined in section 530),
a health savings account (within the meaning of section 223(d)), or
an ABLE account (within the meaning of section 529A),
there is imposed for each taxable year a tax in an amount equal to 6 percent of the amount of the excess contributions to such individual’s accounts or annuities (determined as of the close of the taxable year). The amount of such tax for any taxable year shall not exceed 6 percent of the value of the account or annuity (determined as of the close of the taxable year). In the case of an endowment contract described in section 408(b), the tax imposed by this section does not apply to any amount allocable to life, health, accident, or other insurance under such contract. The tax imposed by this subsection shall be paid by such individual.
For purposes of this section, in the case of individual retirement accounts or individual retirement annuities, the term “excess contributions” means the sum of—
the excess (if any) of—
the amount contributed for the taxable year to the accounts or for the annuities (other than a contribution to a Roth IRA or a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16)), over
the amount allowable as a deduction under section 219 for such contributions, and
the amount determined under this subsection for the preceding taxable year reduced by the sum of—
the distributions out of the account for the taxable year which were included in the gross income of the payee under section 408(d)(1),
the distributions out of the account for the taxable year to which section 408(d)(5) applies, and
the excess (if any) of the maximum amount allowable as a deduction under section 219 for the taxable year over the amount contributed (determined without regard to section 219(f)(6)) to the accounts or for the annuities (including the amount contributed to a Roth IRA) for the taxable year.
For purposes of this subsection, any contribution which is distributed from the individual retirement account or the individual retirement annuity in a distribution to which section 408(d)(4) applies shall be treated as an amount not contributed. For purposes of paragraphs (1)(B) and (2)(C), the amount allowable as a deduction under section 219 shall be computed without regard to section 219(g). Such term shall not include any designated nondeductible contribution (as defined in subparagraph (C) of section 408(
o
)(2)) which does not exceed the nondeductible limit under subparagraph (B) thereof by reason of an election under section 408(
o
)(5).
For purposes of this section, in the case of a custodial account referred to in subsection (a)(3), the term “excess contributions” means the sum of—
the excess (if any) of the amount contributed for the taxable year to such account (other than a rollover contribution described in section 403(b)(8) or 408(d)(3)(A)(iii)), over the lesser of the amount excludable from gross income under section 403(b) or the amount permitted to be contributed under the limitations contained in section 415 (or under whichever such section is applicable, if only one is applicable), and
the amount determined under this subsection for the preceding taxable year, reduced by—
the excess (if any) of the lesser of (i) the amount excludable from gross income under section 403(b) or (ii) the amount permitted to be contributed under the limitations contained in section 415 over the amount contributed to the account for the taxable year (or under whichever such section is applicable, if only one is applicable), and
the sum of the distributions out of the account (for all prior taxable years) which are included in gross income under section 72(e).
For purposes of this section, in the case of Archer MSAs (within the meaning of section 220(d)), the term “excess contributions” means the sum of—
the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 220(f)(5)) which is neither excludable from gross income under section 106(b) nor allowable as a deduction under section 220 for such year, and
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
the distributions out of the accounts which were included in gross income under section 220(f)(2), and
the excess (if any) of—
the maximum amount allowable as a deduction under section 220(b)(1) (determined without regard to section 106(b)) for the taxable year, over
the amount contributed to the accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed out of the Archer MSA in a distribution to which section 220(f)(3) or section 138(c)(3) applies shall be treated as an amount not contributed.
For purposes of this section—
In the case of Coverdell education savings accounts maintained for the benefit of any one beneficiary, the term “excess contributions” means the sum of—
the amount by which the amount contributed for the taxable year to such accounts exceeds $2,000 (or, if less, the sum of the maximum amounts permitted to be contributed under section 530(c) by the contributors to such accounts for such year); and
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
the distributions out of the accounts for the taxable year (other than rollover distributions); and
the excess (if any) of the maximum amount which may be contributed to the accounts for the taxable year over the amount contributed to the accounts for the taxable year.
For purposes of paragraph (1), the following contributions shall not be taken into account:
Any contribution which is distributed out of the Coverdell education savings account in a distribution to which section 530(d)(4)(C) applies.
Any rollover contribution.
For purposes of this section, in the case of contributions to a Roth IRA (within the meaning of section 408A(b)), the term “excess contributions” means the sum of—
the excess (if any) of—
the amount contributed for the taxable year to Roth IRAs (other than a qualified rollover contribution described in section 408A(e)), over
the amount allowable as a contribution under sections 408A(c)(2) and (c)(3), and
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
the distributions out of the accounts for the taxable year, and
the excess (if any) of the maximum amount allowable as a contribution under sections 408A(c)(2) and (c)(3) for the taxable year over the amount contributed by the individual to all individual retirement plans for the taxable year.
For purposes of this subsection, any contribution which is distributed from a Roth IRA in a distribution described in section 408(d)(4) shall be treated as an amount not contributed.
For purposes of this section, in the case of health savings accounts (within the meaning of section 223(d)), the term “excess contributions” means the sum of—
the aggregate amount contributed for the taxable year to the accounts (other than a rollover contribution described in section 220(f)(5) or 223(f)(5)) which is neither excludable from gross income under section 106(d) nor allowable as a deduction under section 223 for such year, and
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
the distributions out of the accounts which were included in gross income under section 223(f)(2), and
the excess (if any) of—
the maximum amount allowable as a deduction under section 223(b) (determined without regard to section 106(d)) for the taxable year, over
the amount contributed to the accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed out of the health savings account in a distribution to which section 223(f)(3) applies shall be treated as an amount not contributed.
For purposes of this section—
In the case of an ABLE account (within the meaning of section 529A), the term “excess contributions” means the amount by which the amount contributed for the taxable year to such account (other than contributions under section 529A(c)(1)(C) or contributions received in a qualified ABLE rollover contribution described in section 530A(d)(4)(B)) exceeds the contribution limit under section 529A(b)(2)(B).
For purposes of this subsection, any contribution which is distributed out of the ABLE account in a distribution to which the last sentence of section 529A(b)(2) applies shall be treated as an amount not contributed.
57 Citing Cases
This case is distinguishable from Michael C.
§ 4973 provides for the imposition of an excise tax equal to 6% of the amount of “excess contributions” to a taxpayer’s individual retirement account (IRA).
For these reasons, we hold that the Ohsman commission payments do not constitute excess contributions to petitioner's -7- Roth IRA.
It accordingly deter- mined that $25,132,892 of the $26 million constituted an “excess contri- bution” to his IRA under section 4973(a)(1) and (b)(2). On June 10, 2016, the IRS issued the notices of deficiency described above. Petitioner timely petitioned this Court. On September 17, 2020, he filed an Amended Petition alleging that the exaction imposed by sec- tion 4973 is a “penalty” within the meaning of section 6751. He assigned error to the 2004–2014 excise tax deficiency determinations on t
As in Repetto, the Court finds that respondent has demonstrated adequate consistency such that these cases are distinguishable from Hellweg. However, respondent did not make a similar determination for 2005. The determination was limited to the adequate documentation oftravel and meals and entertainment expenses ofStrategies. Strategies reported the Delphi income on its Form 1120X, and respondent did not determine additional income for Strategies for 2005. 4. Calculation ofthe Excise Tax Under S
As in Repetto, the Court finds that respondent has demonstrated adequate consistency such that these cases are distinguishable from Hellweg. However, respondent did not make a similar determination for 2005. The determination was limited to the adequate documentation oftravel and meals and entertainment expenses ofStrategies. Strategies reported the Delphi income on its Form 1120X, and respondent did not determine additional income for Strategies for 2005. 4. Calculation ofthe Excise Tax Under S
He notes that section 4973 requires that.the Court determine the excess funding amount as of the close of the taxable year; i.e., 2003." Because he did not make his SEP plan contribution until 2004, petitioner "Respondent determined that petitioner is liable for an excise tax of $178 under sec. 4973(a) for overfunding his consultant business SEP plan. Sec. 4973 imposes a 6-percent tax on individuals who make excess contributions to individual retirement accounts (IRA), annuities, or similar plan
4973 imposes a 6-percent excise tax on excess contributions to individual retirement accounts. Sec. 4980A imposes a 15-percent excise tax on excess distributions from qualified retirement plans. Both of these taxes are included within ch. 43 of the I.R.C. They are therefore subject to the deficiency procedures set forth in subch. B of ch. 63 o
the FSC to Ps' Roth IRAs represented, in substance, contributions from Ps to their Roth IRAs. R contends that SERVED Mar 05 2018 - 2 - because these payments exceeded Ps' contribution limits for their Roth IRAs, Ps are liable for excise taxes under I.R.C. sec. 4973. He] : On the facts presented, Ps and not their Roth IRAs were the owners, for Federal tax purposes, ofthe FSC stock; in substance the FSC dividends were income to Ps, who contributed the funds to their Roth IRAs. Summa Holdings, Inc.
the FSC to Ps' Roth IRAs represented, in substance, contributions from Ps to their Roth IRAs. R contends that SERVED Mar 05 2018 - 2 - because these payments exceeded Ps' contribution limits for their Roth IRAs, Ps are liable for excise taxes under I.R.C. sec. 4973. He] : On the facts presented, Ps and not their Roth IRAs were the owners, for Federal tax purposes, ofthe FSC stock; in substance the FSC dividends were income to Ps, who contributed the funds to their Roth IRAs. Summa Holdings, Inc.
Since the contributions to the Benenson Roth IRAs exceed the annual contribution limits for Roth IRAs, respondent determined that James III and Clement each had an excise tax deficiency under section 4973 of$67,170 for 2008.
137 T.C. No. 2 UNITED STATES TAX COURT ROBERT K. AND JOAN L. PASCHALL,- Petitioners v. COMMIS IONER OF INTERNAL REVENUE, Respondent Docket Nos. 1.0478-08, 25825-08.1 , Filed July 5, 2011. R determined sec. 4973, I.R.C., excise tax deficiencies and additions to tax under sec. 6651(a) (1), I.R.C., for Ps' 2002 through 2006 tax years. The determinations stem from R's assertion that P-H made excess contributions to his Roth individual r tirement account . Held: s are liable for the excise tax defici
Paschall involved a taxpayer liable for the excise tax imposed by section 4973 on excess contributions to a Roth IRA.
spondent determined that the payments from the FSC to the Roth IRA represented, in substance, payments from the FSC to petitioner followed by her contribution of those funds to her Roth IRA, giving rise to excise taxes for excess contributions under section 4973. In a 12 to 4 Court-reviewed Opinion, this Court sustained respondent’s determination of petitioner’s liability for the excise taxes, finding that in substance petitioner, and not her Roth IRA, was the true owner of the FSC stock. Mazzei
Served 07/06/22 2 [*2] under section 4973, plus associated additions to tax and penalties.2 Currently before the Court is petitioner’s Motion for Summary Judg- ment under Rule 121.
(CCH) 1006, 1013 (same); see also Repetto, 103 T.C.M.
Petitioners Wegbreit further failed to pay excise tax due on their excess Roth IRA contributions under section 4973 for 2007 through 2009.
Petitioners Wegbreit further failed to pay excise tax due on their excess Roth IRA contributions under section 4973 for 2007 through 2009.
- 20 - [*20] OPINION There remain only two issues for us to decide: (cid:16)042 Was the Commissioner required to timely notify Block Developers' indirect partners (the Janssons) and notjust their Roth IRAs?; and (cid:16)042 Are the Janssons liable for excise taxes for excess Roth IRA contributions under section 4973 for the 2006 tax year?
- 20 - [*20] OPINION There remain only two issues for us to decide: (cid:16)042 Was the Commissioner required to timely notify Block Developers' indirect partners (the Janssons) and notjust their Roth IRAs?; and (cid:16)042 Are the Janssons liable for excise taxes for excess Roth IRA contributions under section 4973 for the 2006 tax year?
- 20 - [*20] OPINION There remain only two issues for us to decide: (cid:16)042 Was the Commissioner required to timely notify Block Developers' indirect partners (the Janssons) and notjust their Roth IRAs?; and (cid:16)042 Are the Janssons liable for excise taxes for excess Roth IRA contributions under section 4973 for the 2006 tax year?
- 20 - [*20] OPINION There remain only two issues for us to decide: (cid:16)042 Was the Commissioner required to timely notify Block Developers' indirect partners (the Janssons) and notjust their Roth IRAs?; and (cid:16)042 Are the Janssons liable for excise taxes for excess Roth IRA contributions under section 4973 for the 2006 tax year?
Since the contributions to the Benenson Roth IRAs exceed the annual contribution limits for Roth IRAs, respondent determined that James III and Clement each had an excise tax deficiency under section 4973 of$67,170 for 2008.
Since the contributions to the Benenson Roth IRAs exceed the annual contribution limits for Roth IRAs, respondent determined that James III and Clement each had an excise tax deficiency under section 4973 of$67,170 for 2008.
Since the contributions to the Benenson Roth IRAs exceed the annual contribution limits for Roth IRAs, respondent determined that James III and Clement each had an excise tax deficiency under section 4973 of$67,170 for 2008.
Since the contributions to the Benenson Roth IRAs exceed the annual contribution limits for Roth IRAs, respondent determined that James III and Clement each had an excise tax deficiency under section 4973 of$67,170 for 2008.
2 and 2003 tax years and to petitioner and his wife for the 2004 through 2007 - 5 - tax years. In these notices respondent determined that the management fee transactions were not valid business transactions and should result in an excise tax under section 4973. With respect to the 2004 tax year respondent determined that petitioner and his wife should have included in income $482,912 from the management fee transaction. According to respoñdent's calculations, this · inclusion, along with corres
ransactions resolves the income tax issues in favor ofthe IRS and against the petitioners, we need not reach the question whether Mr. Fleck and Mr. Peek would, in the alternative, owe excise tax for excess contributions to their successor IRAs under section 4973. - 4 - FINDINGS OF FACT These cases were submitted by the parties fully stipulated under Rule 122 for decision without trial,3 and the stipulated facts are incorporated herein by this reference. Abbot Fire & Safety, Inc. In 2001 Mr. Flec
Repetto made excess contributions to their Roth IRAs and are liable for excise taxes under section 4973; (2) wlËether SGR and WFR may deduct facilities support expenses;5 (3) whetherrespond nt properlycharacterized certain payments from SGR to Mr.
Repetto made excess contributions to their Roth IRAs and are liable for excise taxes under section 4973; (2) wlËether SGR and WFR may deduct facilities support expenses;5 (3) whetherrespond nt properlycharacterized certain payments from SGR to Mr.
under section 4973, as well as his concession that he re- ceived nearly a million dollars in unreported taxable dividends from the operating business standing in back of Taproot that flowed into his custodial account . Itreally would be tax alche- my if such operating profits went untaxed in an IRA . But the solution is what the parties came up with here
ons to the shareholders. This makes the absence of precedent on the question understandable — for a corporation that has shareholders who have put their stock in an IRA, electing S-corporation status could trigger excise tax on excess contributions, sec. 4973; penalties on prohibited transactions, sec. 4975; and a tax on distributions from the affected corporation that will apply to all its shareholders. B. There is, finally, the objection that by allowing S-corporation stock to be held in tax-d
ntributions and the misuse of IRA's. In particular, Congress imposed a 6-percent excise tax on excess contributions to an IRA in order to offset the benefit that would otherwise result from the deferral of tax on the earnings in the IRA. See - 18 - sec. 4973. Additionally, Congress continued to fully tax excess contributions upon distribution, despite the fact that such contributions were made with after-tax dollars. H. Conf. Rept. 93-1280, supra at 340, 1974-3 C.B. at 501; H. Rept. 93-807, supr
Additionally, Congress continued to fully tax excess contributions upon distribution, despite the fact that such contributions were made with after-tax dollars. H. Conf. Rept. 93-1280, supra at 340, 1974-3 C.B. at 501; H. Rept. 93-807, supra at 130-131, 1974-3 C.B. (Supp.) at 365-366. Significantly, the ERISA conference report states, in
preparation services paid on behalf of petitioner and Betsy by corporations in which Betsy owned stock. Respondent also concedes that petitioner is not liable for additions to tax for fraud for 1987, nor is petitioner liable for excise taxes under sec. 4973 for 1983, 1984, 1985, and 1987. On the latter issue, see, e.g., Johnson v. Commissioner, 74 T.C. 1057, 1062 (1980), affd. 661 F.2d 53 (5th Cir. 1981). On opening brief, respondent “concedes the medical reimbursement adjustment to constructiv
4973 imposes a 6-percent excise tax on excess contributions to individual retirement accounts. Sec. 4980A imposes a 15-percent excise tax on excess distributions from qualified retirement plans. Both of these taxes are included within ch. 43 of the Internal Revenue Code. They are therefore subject to the deficiency procedures set forth in subc
defined by section 402(a)(5)(E)(i). If we conclude that the distribution in question does not qualify for tax-free rollover treatment, then we must also decide whether petitioners are liable for the 10-percent additional tax under section 72(t).3 2 Sec. 4973 imposes a 6-percent excise tax on excess contributions to individual retirement accounts. Sec. 4980A imposes a 15-percent excise tax on excess distributions from qualified retirement plans. Both of these taxes are included within ch. 43 of