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Question #47 test 06/05/97


Guest Jhagan
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Guest Jhagan

What is the amount of non-deductibel contributions for the profit sharing plan as of 12/31/96?

-Profit sharing plan was established on 01/01/94

-Plan provides for a discretionary employer contribution and employee voluntary after-tax contributions.

-Employer has sponsored no other qualified plans.

-Plan satisfied all nondiscriminiation tests since establised.

-NO contributions have been returned to ER.

The Plan has ahd the following compensation and contributions:

Compensation for deduction:

1994 100,000

1995 140,000

1996 160,000

Employer Discretionary Contribution

1994 13,000

1995 25,000

1996 22,500

Employer Voluntary Contributions

1994 5,000

1995 5,000

1996 5,000

Answer is $2,500??????

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Guest DSD

Plans can carryover the nondeductable contribution from prior years in order to take the deduction in the following year. The employer cannot deduct employee voluntary contributions.

1994 - Limit is 15,000 ER made 13,000 OK

1995 - Limit is 21,000 ER made 25,000 therefore 4,000 is not deductable but can be carried over to 1996

1996 - Limit is 24,000 ER made 22,500 plus 95 carryover of 4,000 equals a total of 26,500 leaving a 2,500 nondeductable contribution for 1996.

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