dmb

If the profit sharing portion is cross-tested, wouldn't the plan have to pass both the rate group test and the avg. bfts test??

I guess i didn't ask the right question. If the prohibited transaction was corrected during the year (the money was returned to the plan), should the employer be required to report the amount as income on his Form 1040?? Thanks.

During 1999 the owner of an S-corp withdrew money from his profit sharing account. Thus a prohibitive transaction. He also returned the money by the end of 1999. The plan is now under IRS audit for 1999. The agent told us that Form 5330 would need to be completed to pay the penalty tax and also Form 1099-R for the deemed distribution, which is fine. He also implied that the employer would have to re-do his 1999 Form 1040 to include the distributed amount as income. If he is paying taxes on the deemed distribution from the 1099, does it seem right that he would have to re-do his 1040 and pay as taxable income again??

Something still doesn't make sense to me. Let's work with more realistic numbers. If a sole-prop, over age 50, has $40,000 in net Sked C income after Self Employment Tax Deduction you're saying that they can defer $12,000 and still contribute 25% of the $40,000 as a profit sharing contribution. That doesn't sound right. Even if the $40,000 has to be split among contribution and benefit compensation, for example, $8,000 ps contr and $32,000 benefit comp., from a tax standpoint it doesn't make sense. Even though the 401k deferrals don't cound against the deductible limit, in order for the Sked C to flow, the deferral would have to be counted against the Sked C comp. Am i making sense??

A participant would like to take a hardship distr for primary residence purchase (plan allows hardships). May the participant take the amount needed to purchase residence plus tax that will be paid on distribution or are they only allowed to take the amount needed to purchase residence??? Thanks.

A client has found a commercial real estate parce to purchase. The property is a "Net Lease" with national credit tenant. The cost of the property is about $950,000. Can the client purchase a 50% interest in the property if the retirement plan purchases the other 50% interest??? If not, cna the client's mother or sister purchase 50% interest if the retirement plan purchases the other 50% interest?? Thanks.

So, the only way a 15 year graded or cliff ten vesting schedule would have been allowed is if the plan is a multi employer plan. Is that what you're saying?? Thanks.

Are Collectively Bargained plans not subject to minimum vesting schedule laws??

What are filing requirements if the employees are paying pre tax money for medical, dental, etc.??? Is this considered a welfare plan and is a Sked F required??

I have a standardized calendar year profit sharing plan. I am interested in amending my plan to a Cross Tested formula. If I adopt the amendment May 1, 2002, can I pro-rate the standardized portion of the contribution based on comp earned through April 30 and allocate the cross tested formula on comp from 5/1?? Thanks.

I have one management company and three other companies for which it performs services. I believe that makes the management company a B-Org and the three other companies FSOs. There are three owners. If Owners A and B each own 50% of the Mgmt Co. and 4% of each of the three other companies and Owner C owns 92% in each of the three other companies, would that be considered an ASG??? Thanks.

So even though the deferrals are contributions they don't reduce compensation for profit sharing contribution purposes for a self employed particpant???

Is it possible to have a freeze date later than 12/31/99??? Thanks.

If a Self Employed person has a 401k plan and earns net income of $15,000 for 2002 and defers $11,000, would a profit sharing contribution be based on the $15,000 comp or would it be based on $4,000 comp?? Since the salary deferrals are not part of the 25% of comp deductible limit do i have to consider them for the comp used to calculate the profit sharing contribution?? Thanks.

Thanks again. Any support info for either argument would be greatly appreciated.

Which rules did you pull out?? Where can i find this rule??

Thanks. I knew that it was ok, but something was telling me to make sure. Thanks again.

I have been asked about a Profit Sharing Trust that owns part of an S Corp and the S Corp pays dividends to the Profit Sharing Trust. Does this arrangement sound kosher?? It doesn't to me.

I have a client who is over 65 years old and currently receiving monthly payments from a defined benefit plan from his prior employer, where he was a common law employee. He is currently retired and does some contract work and has schedule C income. If i was to set up a Defined Benefit plan for his contract work, would the benefit have to be offset by the benefit he is currently recieving?? Thanks.

I have a client who participates in a 403(B) plan. He also has a sole prop business and would like to know if he can have a SEP based on his sole prop business?? Thanks.

Thanks again. I sent you an e-mail asking if you had a few minutes maybe we could speak on the matter. Please let me know if this would be possible. Thanks.

I guess since I don't have a QSLOB, all i have is a controlled group, so they must be tested aggregately.

Thanks. So does that mean the Cash Balance plan must pass the rate group test based on cross testing (allocation rates) or could it be tested on accrual rates??

For the Cash Balance plan, if the formula provides different benefits for different classes of participants, does the Cash Balance Plan need to pass the Rate Group Test if all plans pass the average benefits test and the Gateway DB/DC combo.

Both companies have less than 50.