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Pension Trust

This document outlines the rules for deducting contributions to pension trusts from gross income. Employers can deduct contributions made during the tax year to cover pension liabilities accruing during that year. Reasonable amounts contributed above that to cover prior years' liabilities can be deducted at a rate of 1/10th per year over 10 years. The pension plan must be reasonable, actuarially sound, funded by the employer, and the contributions can no longer be controlled by the employer to be deductible. At least 70% of employees must be covered by a permanent retirement plan for it to be considered reasonable.

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Fabiano Joey
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195 views2 pages

Pension Trust

This document outlines the rules for deducting contributions to pension trusts from gross income. Employers can deduct contributions made during the tax year to cover pension liabilities accruing during that year. Reasonable amounts contributed above that to cover prior years' liabilities can be deducted at a rate of 1/10th per year over 10 years. The pension plan must be reasonable, actuarially sound, funded by the employer, and the contributions can no longer be controlled by the employer to be deductible. At least 70% of employees must be covered by a permanent retirement plan for it to be considered reasonable.

Uploaded by

Fabiano Joey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Deductions from Gross Income

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Basis Ceiling Rule
Pension Trust
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Allowable Deductions:
-contribution during the taxable year
to cover pension liability accruing
during the year
-reasonable amount transferred or - not been allowed as
paid into such trust during the taxable deductions
year in excess of the contributions: -is apportioned in equal
parts over a period of 10
consecutive years beginning
with the year in which the
transfer of payment is made
Requisites for Deductibility:
-employer have established a pension
or retirement plan
-pension plan is reasonable and
actuarially sound
-must be funded by the employer
-contributed amount is no longer subject
to the employer’s control or disposition
-the payment has not been allowed
before as a deduction
-the amount is apportioned in equal
parts over a period of 10 consecutive
years beginning with the year in which
the transfer or payment is made

Deductible Payments
-contributions made in the taxable year -100% deductible
for the taxable year liability
-contributions made in the taxable year -reasonable amount -only one-tenth (1/10) is
for the previous year liability deductible for the taxable
year; 1/10 each succeeding
taxable years until it is
fully amortized)

N! in case of series of payments (yearly payments) intended to cover prior years liability to the plan, a 1/10 deduction from
each payments will be allowed as deduction until such period that each payment made is fully amortized

N! private retirement plan (RA No 4917) received by employees of a private firm (maintained by employer) are exempt from all
taxes provided the retiring employee has been in the service of the same employer for at least 10 years and is not less than 50
years of age at the time of his retirement

Requisites of a Reasonable Retirement


Benefit Plan:
-must be a definite written program
-must be permanent and continuing
program (unless terminated by virtue
of a valid business reason)
-must cover atleast 70% of all officials
and employees
>if it has eligibility requirements
and 70% meet the requirements
80% of those eligible must be
Deductions from Gross Income
________________________________________________________________________________________________________
Basis Ceiling Rule
covered
-must provides for the non-diversion of the
corpus (principal)
-must not provide for discrimination in
contributions in favor of highly
compensated officers
-must provide for the contribution to
the trust fund by the employer of officials
or employees, or both for the benefit
of the officials or employees or their
beneficiaries
-must provide for non-forfeitable rights

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