Chee Is a Key Employee of an H

question 43

Essay

Chee is a key employee of an H.R 10 (Keogh) defined contribution plan (a profit sharing plan) created by a partnership. Answer each of the following independent questions.
a.During 2017, $7,400 is contributed to the H.R. 10 plan for Chee. What amount is deductible if Chee's earned income is $45,000 (after the deduction for one-half of self employment tax)?
b.In 2017, $8,020 is contributed to the H.R. 10 (Keogh) plan on Chee's behalf. If Chee's earned income is $36,000 (after the deduction for one-half of self employment tax), what deduction, if any is allowed?
c.The partnership had a bad year in 2017, and only $820 was contributed to the H.R. 10 plan on Chee's behalf. Chee earned only $700 during 2017. Calculate Chee's allowable deduction.

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Definitions:

Legal Capital

The portion of a company's equity that cannot legally be distributed to the shareholders as dividends, typically the par value of issued shares.

Corporate Creditors

Individuals or institutions owed money by a corporation, typically as a result of lending money or providing goods and services on credit.

IFRS

International Financial Reporting Standards are accounting guidelines created by the International Accounting Standards Board, increasingly adopted worldwide for drafting financial statements of public companies.

Reserves

Funds set aside by a company to cover future obligations, losses, or unforeseen expenses.