Opening a solo 401k after dissolving partnership

[Guest slander1709]

Partnership dissolved in 2004. One partner becomes a sole proprietor and earns about $15K from his new business in 2004 after leaving the partnership. The two business entities do co-exist briefly during the transition. The nature of the old and new businesses is identical. In 2005, can the sole propietor open a SEP for himself and make a contribution for 2004 AND open a solo 401K for 2005? No reason for opening the SEP except that it's too late to set up the 401k for 2004.

[Guest slander1709]

After researching the issue further, the question really has to do with "common control" under section 414©. The two business entities described in my original post would be treated as a single employer under that rule. I assume that this would be true for any period during which the businesses coexisted, but what about after the partnership was dissolved? The issue is important because if the two businesses are treated as one for the whole year, a SEP contribution would have to be made for the other partner.

[Earl]

You don't say the partnership %ages, but I think you will find a 415 reg that says the "common" percentage is reduced to more than 50% for application of 415.

So assuming 50/50, I think you can do it.

there are lots of prior discussions on this.

[Guest slander1709]

Thanks Earl. The partnership percentages were 50/50. I'll search for the other posts on this topic, but I welcome further opinions discussions on this particular scenario.

[Alf]

Isn't it too late to set up a SEP for 2004. I thought the document had to be in place by 12/31.

[Guest slander1709]

The deadline for opening a SEP is the tax deadline plus extensions.