Order of Deferral and Contribution

[Guest Lawrenceg]

A partnership with a Solo 401k plan ( no employees other than 4 partners) recognize net income at year end. ( Three partners made $50,000 and one partner made $5,000 in net income before tax). They all previously elected to do maximum Roth contributions. When determining their maximum Roth 401k aftertax contributions and profit sharing contributions, which one is done first.

1.If profit sharing is done first, then the profit sharing deduction will decrease the net amount available after tax for Roth contributions.

2.If Roth contributions are done first, then net income after tax needs to be calculated, then the Roth contribution, followed by a deductible profit sharing expense

It is my understanding that 2. is the correct order but for some reason I do not feel 100% convinced. Any comments?

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