Help with Simple IRA plan- Employer sold business

[MaryM]

First please overlook how stupid these questions may sound. Not very familiar with Simple plan operation.

We have a client(Dentist Schedule C) that has a Simple Plan. The employer just sold his practice to another dentist. The employees with go with the new dentist as of 04/01/2015. The client wants to know if he can continue deferring up to the maximum on the receivables he will be collecting for the remainder of the plan year. We are assuming the employees would only receive employer match for the three months of employment.

What if a recent hire achieved the 5000 dollar threshold prior to sell of business in the first three months of the year.

[Bird]

The client wants to know if he can continue deferring up to the maximum on the receivables he will be collecting for the remainder of the plan year.

Yes.

What if a recent hire achieved the 5000 dollar threshold prior to sell of business in the first three months of the year.

What was eligibility? Service in a prior year? Somehow I think it's irrelevant.

[MaryM]

Thanks for the response. I was thinking that he could but wanted to make sure. Appreciate your help

[QDROphile]

That depends on the relationship to the receivables. If the receivables are part of the proceeds of the sale of the business (deferred and contigent), no. If he kept the accounts receivable, sold the rest of the business, and remains "in business" to collect the receivabless, maybe so. To be subject to deferral, the income must be income from self employment or compensation by an employer, not income from sale or liquidation of an asset, to be subject to deferral.

[MaryM]

The client should have plenty of income from receivables for the period before the sale took place plus he did keep accounts receivable. So he does have self employment income. so that would be my answer, he can defer on that amount. Thanks.