Which of the following describes the tax consequences to a corporation for establishment of a qualified retirement plan?

The establishment of a qualified retirement plan allows a corporation to enjoy favorable tax treatment regarding contributions made to that plan. Specifically, the corporation is permitted an immediate tax deduction for the contributions it makes for a specific year. This means that any contributions made by the corporation to the qualified retirement plan can be deducted from its taxable income in the year those contributions are made. This aspect creates a tax incentive for companies to provide retirement benefits to their employees, as it can effectively reduce their overall tax liability.

The fundamental principle here is that the IRS allows these deductions to encourage businesses to save for the future of their employees. The tax deduction is available regardless of whether or not the employee has yet included the contributions in their taxable income, which typically happens at the time of distribution—when employees actually access those funds during retirement.

Understanding this immediate deduction is crucial because it highlights how corporate contributions to retirement plans differ from other business expenses and underscores the government's intent to promote employee retirement savings through beneficial tax policies.