Lame Duck

I think the same rationale applies to B and C. We do not have 5 or fewer people owning at least 80% of B and C. It appears that the maximum ownership would olny be 66 2/3%.

In order for a brother-sister controlled group to exist, two tests must be met. The same 5 or fewer persons must own at least 80% of each entity and the identitcal ownership must be more than 50%. In this case, you do not meet either of the two tests. The 80% requirement is applied to those persons who own something in each entity. In your case, the 100% owner of A owns only 50% of LLC B, so the 80% requirement is not met. In determining identitcal ownership, you look at the lowest percentage owned by each person in the entities. The identical ownership for A is only 50% (the amount of his or her ownership in the LLC). Since it is not more than 50%, it also fails the second part of the test. This is based upon your indications that the other 50% owner of B is a completely unrelated party. if the person is required to be aggregated with A, you would have a controlled group. As you stated, you do need to also be aware of the ASG rules. PIP is quiker than I am. I'm more long winded.

I will be interested in what the SPD says. I think it is possible that the person Questioner spoke to is not aware of the amendments made in 2002. Questioner can also request a copy of the actual plan document if the language in the SPD is not current.

ctfudge07, I don't claim to be an expert on the Roth 401(k). There are others here who can better advise you than I can. However, I do not believe having a Roth 401(k) will limit your ability to make Roth IRA contributions any more than a traditional 401(k) contribution will limit it. As you are aware with the Roth IRA, the main advantage of the Roth 401(k) is the ability to contribute taxable money today with the expectation of receiving tax free money in the future. Over a long period of time, the advantages of the tax free savings should far out way the taxes you pay today. I have been following your other thread with great interest and have been impressed with the insightful questions and observations you've made. The advice you get from the others in this forum is from some of the best minds in the country. I don't think you can go wrong by listening to them.

ctfudge07, In your other post you mentioned the advantages of a Roth IRA over a traditional IRA. Those same rules apply here. The after tax contributions to the plan could be to a Roth 401(k) feature. This operates in much the same way as the Roth IRA. The contributions are taxable but the gains are tax free when distributed. Over a long period of time, the tax savings on these gains could far outweigh the tax advantage of deductible contributions today. It is something you will want to consider. It might be advisable to split the contributions so that the 6% that is matched is made with tax deductible contributions and the balance with taxable, Roth 401(k) contributions. For example, assume that you are in a 25% tax bracket. A $15,000 before tax contribution would save you about $3,750 in taxes. At a 5.5% rate of return for 20 years, that $15,000 contribution would grow to approximately $43,700. The tax on this would be $10,925 at a 25% rate. In other words, you are trading a tax deduction of $3,750 today for a tax of $10,925 in the future.

In order to be a controlled group, the organizations must pass both parts of a 2 part test. This test requires that a) 5 or fewer persons own at least 80% of both organizations, when considering only individuals who have an ownership interest in both entities, and b) When comparing identical ownership (the lowest percentage owned by the individual in each entity), it must be more than 50% In your example Company 1 Company 2 Identical Ownership AA 100% 50% 50% BB 25% 0% CC 25% 0% This fails both tests. Since BB and CC do not own any part of Company 1, their interests cannot be used in determining the 80% threshold. In addition, AA owns only 50% of Company 2 so the identical ownership is not more than 50% so it also fails the second part of the test. This assumes that the ownership interests of BB and CC are not required to be attributed to AA. As an easy rule of thumb, when dealing with a person who owns 100% of one business, in order for there to be a controlled group he must also own at least 80% (either directly or through attribution) of the other organization.

This looks very similar to something I wrote on a cocktail napkin last Friday night.

I'm not sure about WDIK's list of movies. A lot of them were real turkeys.

I believe that is correct. It is my understanding that the IRS requires a federal EIN to file Form 5500.

You could also consider the history of defined benefit plans, both in the large employer and small employer market.

This is just what I need to fill my time. 1. Romancing The Stone

15. Ferris Bueller's Day Off 24. Lost In Space

It certainly relieved my stress.

Who has time to see movies?

14. The Incredible Hulk

For a brother sister controlled group to exist, you have to pass two tests: 1. 5 or fewer people must own at least 80% of both businees, when looking only at people who have some ownership interest in both businesses. 2. They must own more than 50% of both business when looking at identical ownership (the lowest percentage of ownership in each business. In your case, you have: A B Identical Ownership Husband or Wife 100% 56% 56% This meets the second part of the rule but not the 80% part. Based on the facts you've given, I don't see a controlled group. However, you should look into who owns the other 46% of B. There may be some required attribution between them and the husband/wife team. Additionally, any ownership that A has in B would have to be attributed to the owners of A. See 1.414©-4 (b)(4).

I'm glad I was on vacation last week. I would have gotten even less work done than I did if I'd been working at these answers.

The total combined contribution amount between the two plans is 25% of your net compensation, to a maximum of $44,000. If you are incorporated, this is 25% of your W-2. However, if you are a sole proprietor, this is 25% of your compensation after the plan contribution has been made (20% of your gross net profits). For example if your net profit is $100,000 (after subtracting out 1/2 the self-employment tax), your maximum contribution between both plans would be $20,000. This is 20% of the net profit of $100,000 but 25% of of your net after contribution ($80,000). Your contribution to your money purchase plan would be $6,400 (8.0% of $80,000) and would leave $13,600 that could be contributed to your SEP, assuming the SEP does not have a specified contribution limit. You may want to consider terminating the money purchase plan since it provides you with no added benefit. The maximum contribution to a SEP or profit sharing plan is 25% of compensation, the same limit that applies to your combined plans. Having one plan will significantly ease your adminstrative load. Depending on your compensation level and age, you may want to consider a 401(k) plan, which could possibly increase your contributions above the current levels.

#16 War of the Worlds That was a pretty good guess on my question, Tom, but it's not exactly what I was looking for. Keep trying.

I knew the week was shot. #26 The English Patient #30 Jerry maguire #32 Deliverance #34 Braveheart And now one for Tom Trapped in time. Surrounded by evil. Low on gas.

A few more - #2 Babe #3 Jurrasic Park #4 Volcano #22 Dirty Harry #31 Jaws

A few guesses #7 Animal House #13 Roger Rabbit #25 The Blues Brothers #33 The Graduate

Well, that shoots this week.

Most insurance companies credit the annuity contract with gains of 3.0% to 3.5% per year. Most actuaries will use a rate of return of 5.0% to 6.0%. The use of a lower rate of return will require a higher contribution. This is perfectly acceptable if the client intends to take a distribution in the form of an annuity contract. However, if the client is taking a lump sum distribution, which about 99% of my DB clients do, the amount paid out under the plan will be the same in either case. It will require the use of a higher interest rate to calculate the distribution (assuming a maximum benefit under the plan) and may result in excess assets in the 412(i) plan. There have been a number of very lengthy discussions about the 412(i) versus DB here on Benefits Link. If you want some more information about the controversy, I suggest you look at some of those.

I am going back into the dim dark recesses of my mind for this, so I won't makes claims as to the accuracy of it. At one point in time, professional service corporations could be established using any fiscal year end. Sometime in the mid 80s(?) the IRS began to require all new professional service corporations to use a 12/31 fiscal year end, unless they could show subsatantial need for a different year, such as cash flow. The PBGC does not set requirements as to the fiscal year for a professional service organization. Any organization that meets the PBGC definition of a professional service employer should be exempt from PBGC coverage, regarless of the fiscal year of the organization.