In this previous post back in 2003 here, I noted how the IRS was targeting Simplified Employee Pensions in a compliance initiative. Joe Kristan in The Roth & Company, P.C. Tax Update Blog discusses a recent Tax Court case in which the IRS disallowed deductions for SEP contributions because the small business owner who established the SEP for employees failed to make contributions for his wife. Brown v. Commissioner, T.C. Summary Opinion 2008-56.
Know how the attribution rules under Section 318 of the Internal Revenue Code can sometimes wreak havoc for employers under the controlled group provisions? The taxpayer here tried to apply his “creative” interpretation of the attribution rules by arguing that it didn’t matter that contributions were not made for the wife because the SEP contributions made on behalf of the husband should be “attributed” to the wife. It is no surprise that the Tax Court didn’t buy that argument.