That isn't the way it works. What is allowed is what the statute says is allowed. The statute does NOT specifically say a dead person can make a contribution to an IRA. Alan's analysis is correct.
As you are aware, regulations are only valid to the extent they are consistent with the statute. Section 408 says IRA's are for the "benefit of an individual or his beneficiaries...." Combined with section 219's allowance of a retroactive payment, it appears to me that the regulations you cite are inconsistent with the statutes.
No, there is no specific allowance for a payment for someone who has died. But the statutes certainly imply that.
Alan's analysis is correct if the regulations he cites are valid. I believe the regulations are inconsistent with the statutes, and are as a result invalid to the extent they imply an estate cannot make a contribution on behalf of the deceased.
This will be my last comment on this subject (hear that Dick). It is one thing to say that a regulation is inconsistent with the statute versus providing substantial authority to prove it. Treasury regulations are considered by the courts (including the USSC) to have the full force and effect of law unless they conflict with the statute. To prove that a regulation is inconsistent you would have to show either an improper exercise of IRS power or too broad an interpretation of the statute. I believe you would be hard-pressed to do that and would lose. I would not put my signature on a return that was trying to make that case.
Lastly (I really mean that), I don't see how any contribution can be made to a nonexistent IRA. When you die, your assets pass to some other entity. State and federal law dictate how that happens. Retirement plans pass to the named beneficiary or the estate of the decedent if there is no other beneficiary named. As the decedent's IRA no longer exists after death, I don't see how the beneficiary that is the new owner can make a contribution to a nonexistent IRA or to the new beneficiary IRA.
What specific sorts of person does the statute say are allowed to make contributions? The statute doesn't say that bald people are allowed to make contributions. The statutue doesn't say that short people are allowed to make contributions. . . .
Seth
Consider: I have power of attorney for my mother. I write a check to her local library from her checking account. For all IRS purposes, _she_ made the donation. It shows up on her tax return, not mine.
Suppose, instead of an IRA contribution, the check in the mail was to pay a phone bill. The phone company received the check, cashed it, and credited the money to the bill. Thus, the bill was paid. Who paid it? It seems to me that the person who wrote the check on his own checking account paid it, no matter what subsequently happened to him. In the IRA case, assuming that the contribution was made, there's only one person who could reasonably be said to have made it.
He still made the contribution. The money arrived at the administrator's office and went into his IRA. Therefore, _somebody_ contributed it. It is clear that no person other than the (now-deceased) taxpayer contributed it. When the impossible is eliminated, whatever remains must be the truth.
The contribution was made by the person who is allowed to make it. Is there anything in the statute that makes his subsequent status relevant?
Seth
I'll certainly agree that's a valid interpretation. I guess we'll just have to wait what the courts say, if this issue ever gets that far.
But you can't do that after she dies.
The issue of an IRA contribution is completely different, because it follows a different set of rules.
(1) The statute in general allows an action, such as a contribution. So unless a later part of the statute explicitly disqualifies the action under certain circumstances, it is allowed.
However, going by common sense (which is probably a safe thing to do if it is consistent with an IRS friendly position) the contribution should not be allowed here because the individual no longer exists, so the IRA no longer exists.
(2) I have problems in general with your statement. That would mean for example that we are free to do nothing, unless the government specifically allows us to do so. So we should have laws allowing us to jog or kayak on Saturday mornings, otherwise we can't. In fact, this is probably how it is in some countries. Or it could it mean that that if were no federal law on a certain issue, then the federal courts will defer to the states. Both of these are blows to individual rights.
...But it doesn't go out of existence (or become an "inherited IRA") instantly. There are TC rulings that address administration and conversion of entities due to death (e.g. the conversion of a "grantor trust" to irrevocable). The Court recognizes that there is a "period of administration" - and as long as such has NOT completed, the IRA still exists to receive the contribution. That's another reason why the guy who mails a contribution to his trustee then dies is still permitted the contribution.
I agree: With an open government, unless specifically forbidden, an action is permitted.
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