Count comp from real estate holding company?

[Jim Chad]

I think the answer is no but I want to ask in case I am missing something. A company with 20 employees is setting up a 401(k) Plan.

The 2 owners of this company also own a real estate holding llc. They would like to include the holding company in the plan so they can count the comp from both companies. I think they cannot because it is passive income. Am I missing anything?

[Bird]

I always say if they're paying self-employment taxes on it, it's earned, and if not, it's not. Actually I tell them it's up to their accountant but I think it always boils down to that. Odds are they are not paying SE taxes on that income.

[Guest jmherisa]

The only way this could work is if the owners are receiving "earnings from self employment" from the holding company which is reported on line 14A of their K-1's. I agree with Bird, their accountant should be involved in this. Good chance there would NOT be any SE income based on how you described it. Also make sure you take a good look at the ownership of both companies (controlled group analysis, etc.) to make sure there are no other issues being missed.