Rev. Rul. 81-114

The purpose of this revenue ruling is to restate the position in Rev. Rul. 57-419, 1957-2 C.B. 264, in view of the enactment of the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 1974-3 C.B. 1.

The issue is whether deductions are allowable under section 404(a) of the Internal Revenue Code for contributions made to an employees' trust that is valid in all respects under local law except for the existence of a corpus at the close of the taxable year. Such contributions were made after the close of the taxable year, but during the time prescribed for filing the employer's income tax return.

In order to be an allowable deduction under section 404(a) of the Code, a contribution to an employees' trust must be made pursuant to a plan in effect and to a valid trust which is recognized under local law.

Section 404(a)(6) of the Code provides that a contribution to an employees' trust is deemed made on the last day of the preceding taxable year if the payment is made on account of such taxable year and is paid not later than the time prescribed by law for filing the return for such taxable year (including extensions). This rule applies to cash basis as well as accrual basis taxpayers.

Rev. Rul. 76-28, 1976-1 C.B. 106, provides rules with respect to the application of section 404(a)(6) of the Code. These rules do not, however, change the requirement that a plan must be in existence as of the last day of the employer's taxable year with respect to which a contribution is made.

In Dejay Stores, Inc. v. Ryan, 229 F.2d 867 (2d Cir. 1956), and Tallman Tool & Machine Corp. v. Commissioner, 27 T.C. 372 (1956), acquiescence 1957-2 C.B. 7, it was held that where trust corpus was lacking at the close of a taxable year because of the employer-taxpayer's failure to make the initial contribution to an otherwise valid trust, such corpus was considered furnished and the trust was deemed to have been in existence for that year if the contribution was made within the time prescribed for filing the income tax return for that year.

Accordingly, deductions are allowable under section 404(a) of the Code for contributions paid after the close of the taxable year, but within the time prescribed for filing the employer's income tax return for the preceding year, even though the employees' trust did not have a corpus at the close of the preceding taxable year.

Rev. Rul. 57-419 is superseded because the position stated therein is restated under current law in this revenue ruling.