Self-employed individual who has 1999 earned income of $160,000+ parti

[Guest Janice Izzard]

Would a partner who is a self-employed individual with "earned income" exceeding $160,000 (for 1999)who is a participant in a qualified 401(k) profit-sharing plan which is integrated with social security be subject to the IRC Sec. 404(a)(3) deduction limit of 15% at both the partnership entity AND individual levels since the partner claims a deduction for the contribution on his individual return? Stated differently, if the plan allocation formula resulted in an allocation to a partner while the total contributions at the entity level were not in excess of 15% of total covered compensation, would each individual partner be limited to 15% of the applicable compensation limit? For purposes of this inquiry, please ignor the special rules requiring a reduction in the partners earned income for the self-employment tax deduction and for the plan contribution deduction.

[Guest lforesz]

Hi,

I was just wondering if you ever got an answer because I am facing the same type of situation. My dilemna is that I do not know if the partner's contributions counts towards the entities' 15% deductible limit? Any ideas. Thanks!

[Jim Chad]

Sec. 404 is an Employer level limit. Even though Partner's tax burdon flows through to the indiviidual return, the partnership is still the entity subject to Sec. 404.