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ALEXANDER'S TERRIBLE HORRIBLE NO GOOD VERY BAD IRA DEDUCTION
June 03, 2005
Alexander is a wise saver. He made a $2,000 IRA contribution in 2001. So far, so good.
Alexander also participated in his employer's retirement plan. Also good.
Alexander filed a joint return for 2001 with Gloria reporting joint adjusted gross income of $114,193.66. Alexander deducted his $2,000 IRA contribution. That triggered a horrible, no good, very bad IRS notice disallowing his deduction.
The tax law disallows deductions for IRA contributions when a taxpayer participates in another retirement plan, if the taxpayer's income exceeds certain amounts. For 2001, the deduction phase-out was complete at $63,000 of income for joint filers.
Alexander used a novel argument at Tax Court. He argued that his wife's income shouldn't count in determining the deduction phase-out on the joint return. The Tax Court didn't buy it.
Some days are just like that.
Cite: Gloria Yuen-Mee Ho and Alexander Chi-Shun Tsang v. Commissioner, T.C. Memo. 2005-133
Read about the 2005 traditional IRA phase-out and deduction rules here.
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