|
|
Article: Does a sec. 457 plan work with a sec. 501(c)(7) organization? (retirement benefit plans)
- Article from:
- The Tax Adviser
- Article date:
- September 1, 1993
- Author:
CopyrightCOPYRIGHT 1993 American Institute of CPA's. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
Many membership organizations exempt under Sec. 501(c)(7), especially country clubs, have established Sec. 457 deferred compensation plans for their key executives and employees without fully understanding the tax ramifications of such plans. Depending on the choice of investment vehicle, the investment income earned on the contributions may be taxable as unrelated business taxable income, with no offsetting deductions.
Sec. 512(a)(3) requires a Sec. 501(c)(7) organization to include investment income as unrelated business income (UBI) subject to income tax, even though it is a tax-exempt entity. More specifically, investments in deferred annuities, a common ...