                       T.C. Memo. 2000-250



                     UNITED STATES TAX COURT


             SUSAN JANE HOYEZ, C.P.A., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 13572-98.                    Filed August 10, 2000.


     Susan Jane Hoyez, pro se.

     Nhi T. Luu-Sanders, for respondent.


                       MEMORANDUM OPINION

     POWELL, Special Trial Judge:   Respondent determined a

deficiency in petitioner's 1993 Federal excise tax and an

addition to tax under section 6651(a)(1) in the respective

amounts of $415 and $104.   The issue is whether a contribution to

petitioner’s pension plan was timely under section 412.1



1
     Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
                                - 2 -

Petitioner resided in Portland, Oregon, at the time the petition

was filed.

       This case was submitted fully stipulated under Rule 122, and

the facts may be summarized as follows.    Petitioner is a

certified public accountant doing business as a sole

proprietorship.    On November 22, 1993, petitioner adopted a

revised money purchase pension plan (the Plan) effective January

1, 1993.    The Plan was adopted to meet the requirements of the

Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, and

subsequent legislation including the Omnibus Budget

Reconciliation Act of 1993, Pub. L. 103-66, 107 Stat. 312.

       The Plan is a qualified plan within the meaning of section

401.    The Plan is subject to the funding requirements of section

412, and petitioner is an employer within the meaning of section

412.    Both petitioner and the Plan have taxable years ending

December 31.    Petitioner made contributions to the Plan for 1993

of $1,491 and $4,145 on April 28 and October 3, 1994,

respectively.

       Respondent determined that the October 3, 1994, contribution

was made after the period allowed by section 412(c)(10)(B).      As a

consequence the Plan failed to meet the minimum funding standard

for 1993.    Respondent also determined that petitioner failed to

file a Form 5330, Return of Excise Taxes Related to Employee

Benefit Plans.    Respondent issued a notice of deficiency for 1993
                                - 3 -

for excise tax under section 4971(a) and imposed a failure to

file penalty under section 6651(a)(1).

                            Discussion

A. Excise Tax Under Section 4971(a)

     Section 412 was designed to ensure that qualified plans

would accumulate sufficient assets to meet those plans’

obligations to their beneficiaries.     See H. Rept. 93-779, at 73

(1974), 1974-3 C.B. 244, 316.   Section 412(a), in part, provides:

     A plan to which this section applies shall have satisfied
     the minimum funding standard for such plan for a plan year
     if as of the end of such plan year, the plan does not have
     an accumulated funding deficiency. For purposes of this
     section and section 4971, the term “accumulated funding
     deficiency” means for any plan the excess of the total
     charges to the funding standard account for all plan years
     (beginning with the first plan year to which this section
     applies) over the total credits to such account for such
     years or, if less, the excess of the total charges to the
     alternative minimum funding standard account for such plan
     years over the total credits to such account for such years.
     * * *

     To ensure that a qualified plan maintains minimum funding,

section 412(b)(1) requires employers to maintain a “funding

standard account” for each plan.   Charges to the account consist

of the normal cost of the plan for the plan year and the

amortization of certain costs and liabilities.    See sec.

412(b)(2).   Credits to the account consist, generally, of

employer contributions for the plan year and the amortization of

certain adjustments.   See sec. 412(b)(3).
                               - 4 -

     At the end of each plan year, if the charges to the account

(defined by section 412(b)(2)) exceed the credits (defined by

section 412(b)(3)), the excess is referred to as an “accumulated

funding deficiency”.   Sec. 412(a).    If there is an accumulated

funding deficiency for a plan year, the plan is underfunded, and

the employer is subject to excise tax under section 4971(a).       See

secs. 412(a), 4971(a).   Section 4971(a) imposes a 10 percent tax

upon the amount of the accumulated funding deficiency.     Section

4971(e) provides that the tax shall be paid by the employer

responsible for contributing to the plan.

     Under section 412(b)(3)(A) the funding standard account

shall be credited with “the amount considered contributed by the

employer to or under the plan for the plan year”.    This amount

includes contributions made during the plan year and certain

contributions made after the close of the plan year.     Section

412(c)(10)(B) provides that

     any contributions for a plan year made by an employer after
     the last day of such plan year, but not later than two and
     one-half months after such day, shall be deemed to have been
     made on such last day. For purposes of this subparagraph,
     such two and one-half month period may be extended for not
     more than six months under regulations prescribed by the
     Secretary.

Section 11.412(c)-12(b)(1), Temporary Income Tax Regs., 41 Fed.

Reg. 46597 (Oct. 22, 1976), provides:

          (b) Six month extension   of two and one-half month
     period. (1) For purposes of    section 412 a contribution for
     a plan year to which section   412 applies that is made not
     more than eight and one half   months after the end of such
                                - 5 -

     plan year shall be deemed to have been made on the last day
     of such year.

     The issue in this case is whether the October 3, 1994,

contribution to the Plan was timely.    Both parties agree that the

contribution to the Plan made on October 3, 1994, was made more

than 8-1/2 months after the plan year ended.    Petitioner contends

that the language of section 412(c)(10)(B) acts as a safe-harbor

and not as a definitive deadline.    Petitioner argues that section

412(c)(10)(B) does not contain any language indicating that it is

the sole time period in which a deemed contribution can be timely

made.    Petitioner points to the language of section 412(b)(3)(A),

i.e., “the amount considered contributed by the employer to or

under the plan for the plan year”, and contends that the use of

the phrase “plan year” indicates that other time periods are

contemplated by the statute.

        We cannot read the phrase “plan year” in section

412(b)(3)(A) to mean that separate time periods are contemplated

by the statute.    The use of the phrase “plan year” is a reference

to the actual calendar or fiscal tax year of the plan.     In this

case, references to the “plan year” would be references to the

Plan in 1993 that ended December 31.    Section 412(c)(10)(B)

determines when a contribution is deemed contributed, not section

412(b)(3)(A).    If an amount is deemed contributed under section

412(c)(10)(B), section 412(b)(3)(A) simply acts to credit that

amount to the funding standard account.    Section 412(c)(10)(B)
                                 - 6 -

provides that the “two and one-half month period may be extended

for not more than six months”.    That language sets a definitive

time limit.

     Moreover, the legislative history of section 412 does not

support petitioner’s “safe-harbor” argument.    The conference

report states that

     the contribution may relate back to the plan year if it is
     made within 2-1/2 months after the close of that plan year,
     plus any extension granted by the Internal Revenue Service
     up to an additional 6 months (for a maximum of 8-1/2 months
     after the end of the year). [H. Conf. Rept. 93-1280, at 290
     (1974), 1974-3 C.B. 415, 451; emphasis added.]

The use of the word “maximum” is also definitive.    The

legislative intent was to create a fixed time period in which

deemed contributions would be allowed.

     Petitioner contends that section 412(c)(10)(B) should be

read to allow deemed contributions beyond the 8-1/2 months

because of our holding in Aero Rental v. Commissioner, 64 T.C.

331 (1975).   In Aero Rental we held that the statutory timeframe

of section 401(b) for retroactive amendments acted as a safe-

harbor and was not a definitive deadline.    The taxpayer in Aero

Rental initiated a stock bonus plan in December 1969.      The

taxpayer requested a determination that the plan qualified under

section 401 in June 1970.   After extended negotiations with the

Commissioner, the taxpayer amended the plan to comply with the

Commissioner’s position in July 1971.    But the Commissioner

disallowed the taxpayer’s deductions for plan contributions for
                               - 7 -

1969 and 1970 on the ground that the plan in actual operation had

not met the requirements of section 401 during those years.

     The Court found that the legislative history indicated that

Congress did not intend that section 401(b) would set an

exclusive time period.   We noted that Congress subsequently

amended section 401(b) to give the Commissioner discretion in

determining the amount of time to permit retroactive amendments.

Furthermore, the taxpayer had negotiated with the Commissioner in

good faith and acted in a timely manner.    We concluded that

section 401(b) was not an exclusive timeframe, but was intended

to act only as a safe-harbor, and, therefore, the taxpayer’s

retroactive amendments were valid.

     But we are faced with a different statute here.    In cases

specifically dealing with the time limit of section

412(c)(10)(B), the Court has adhered to the strict language of

the statute and the regulations.   See D.J. Lee, M.D., Inc. v.

Commissioner, 92 T.C. 291 (1989), affd. 931 F.2d 418 (6th Cir.

1991); Wenger v. Commissioner, T.C. Memo. 2000-156.     Moreover,

Aero Rental v. Commissioner, supra, has not been expanded to

apply outside of section 401, and it has been narrowly construed

within the confines of section 401.    See, e.g., Bolinger v.

Commissioner, 77 T.C. 1353, 1360-1361 (1981); Jack R. Mendenhall

Corp. v. Commissioner, 68 T.C. 676, 682 (1977); Pawlak v.

Commissioner, T.C. Memo. 1995-7.     Finally, there is no indication
                               - 8 -

that Congress intended to create a case-by-case reasonableness

determination of whether a contribution could be deemed timely.

We sustain respondent’s determination of the excise tax.2

B. Failure To File Penalty

     Section 6011(a) provides that, when required by regulations,

any person liable for a tax shall make a return.     Section

54.6011-1(a), Pension Excise Regs., requires any employer who is

liable for the tax under section 4971(a) to file an annual return

on Form 5330.   Petitioner did not file such a return.

     Section 6651(a)(1) imposes a minimum addition to tax for

failure to timely file a return in the amount of $100 or 5

percent of the amount of tax due per month for each month that a

return is not timely filed, not to exceed 25 percent “unless it

is shown that such failure is due to reasonable cause and not due

to willful neglect”.   United States v. Boyle, 469 U.S. 241, 246

(1985).   Petitioner has not addressed this issue, and, we assume

that, if she is liable for the excise tax, she concedes the

addition to tax under section 6651(a)(1).

                                            Decision will be entered

                                       for respondent.


2
     Petitioner contends that under IRS Publication 560,
Retirement Plans for the Self-Employed, contributions can be
retroactively applied to the previous year if the contributions
are made by the due date of the employer’s return. We have
recently considered and rejected this argument. See Wenger v.
Commissioner, T.C. Memo. 2000-156. We see no reason to restate
our reasoning here.
