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Change of Ownership for a Company taxed as a Partnership


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Hi,

 

Let's say there is a 401(k) plan for a company that's taxed as a Partnership and has 2 owners (50% ownership each) at the beginning of 2020. In the middle of 2020, the owners leave the company and now there are 2 other owners (also 50% each). How would you calculate the compensation for the owners after the adjustments for FICA and contributions to other participants? We use DATAIR for our testing. The issue that I'm seeing is that if we code each of the 4 owners during the year as 50% owners, the adjusted compensation will not be calculated correctly because the total ownership adds up to more than 100% (4 owners at 50% each = 200%). What would be the correct way to run a plan like this?

 

Thanks!

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I think you have to know how they are allocating the contribution expenses for employees amongst themselves.  Might have to do some manual calcs or trick the system by dummying in some numbers.  Don't know Datair to opine on how that would be done.

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