thepensionmaven Posted April 16, 2015 Share Posted April 16, 2015 We are reviewing a deminimus benefit defined benefit plan for a sole proprietor, age 74. The first year of the plan was 2013. An individual from an insurance company prepared the calcs for this individual. The TNC was 103% of the net Schedule C. Net Schedule C $3,900 - TNC $40,000? Isn't the deduction limited to the net Schedule C? Link to comment Share on other sites More sharing options...
Lou S. Posted April 16, 2015 Share Posted April 16, 2015 Yeah you can't deduct more than your income for schedule C employee. But if I recall correctly the IRS doesn't impose the 10% penalty on non-deductible contributions anymore for self-employed if it is required to meet minimum funding. Link to comment Share on other sites More sharing options...
Andy the Actuary Posted April 16, 2015 Share Posted April 16, 2015 I sort of recall from years ago some analysis whereby a basis was established so that the employee would not be taxed on that part of the distribution attributable to after-tax contributions. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
Mike Preston Posted April 17, 2015 Share Posted April 17, 2015 ATA: Never heard of a legit argument for establishing basis. Lou: Do you have a cite other than the non-deductible excise tax can be eliminated by making the election in 4972(c )(7)? Link to comment Share on other sites More sharing options...
Lou S. Posted April 17, 2015 Share Posted April 17, 2015 Mike I thought it was 4972©(4) that made them not subject to the excise tax. That is it for purposes of the excise tax it is "treated" as deductible if required under 412. https://www.law.cornell.edu/uscode/text/26/4972 Link to comment Share on other sites More sharing options...
Lou S. Posted April 17, 2015 Share Posted April 17, 2015 And I agree, I've never heard a good argument for establishing basis or carrying forward the deduction to future year. Link to comment Share on other sites More sharing options...
Andy the Actuary Posted April 19, 2015 Share Posted April 19, 2015 I will not argue this because it was not my contention. I wanted to share that attorney client about 5 years ago used the regulations in 1.72-17 and 1.72-17a as justification that a basis was created. Since to my knowledge he was not audited, he must have been right. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
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