Earl Posted October 30, 2002 Posted October 30, 2002 Sorry for the basic nature of this question. I did a search and did not find anything about it.... Guy is having a down year and his DB contribution will exceed his Schedule C income. Is his deduction limited to his Schedule C income? Is the balance deductible next year in addition to whatever is calculated as the required amount for next year? Is this in 412 somewhere that I can't find? Thank you CBW
david rigby Posted October 30, 2002 Posted October 30, 2002 If "Guy" refers to a plan covering only one person (or husband and wife), don't think about a waiver. Think about amending the plan, such as a plan freeze. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Earl Posted October 31, 2002 Author Posted October 31, 2002 thanks - yes it is a one participant plan. I did find information on current year limit in 404. Probably a question for my actuary, but isn't it too late to meaningfully reduce the 2002 contribution by freezing now? and next year his income will go back up so i don't think freezing and unfreezing would get past my actuary. Just wondering about the un-deductable amount for 2002. Is it never deductible? CBW
Blinky the 3-eyed Fish Posted October 31, 2002 Posted October 31, 2002 The nondeductible may or may not be deductible in the future. It depends if there is a future disparity between the minimum required contribution and the maximum deductible limit. Also, new in plan years beginning in 2002 is the fact that the unfunded current liability is deductible (not counting benefit increases resulting from plan amendments in the last 2 years for small plans such as this). This most likely will increase the chance that there is a disparity in the min/max. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Earl Posted November 1, 2002 Author Posted November 1, 2002 Sounds like what I was afraid of. Even if it is required for one year, it is only deductible in future years to the extent that the 404 limit exceeds the 412 minimum and the guy passes up what could have been contributed and deducted for that future year to allow for the deduction of what was required for the past year. I guess that actually even makes sense. What if the plan terminates? Does he get to deduct it post-termination in any way? If not, does he have basis when he withdrawals it? CBW
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