Schedule C Income- 2 Separate Businesses

[steverenner]

Solo 401(K) Plan, 2 separate businesses and both have adopted the plan   Spouse is on payroll in one business and is the only employee.  The other business has no employees.  In past years, we have utilized the Schedule C income from both businesses for purposes of calculating the employer contribution for the owner.  So this year, Business A has a loss of 30K and Business B has a profit of 50K.  My guess is that we need to net the 2 businesses for income of 20K as the earned income for the owner since both companies have adopted the plan.  Can anyone confirm this? The plan sponsor business with the spouse as the employee is the business showing the loss.  

[Kevin C]

For a self-employed person, you count the earned income or loss from all of the trades or business that have adopted the plan.

Quote

1.401-10(b)(2) If a self-employed individual is engaged in more than one trade or business, each such trade or business shall be considered a separate employer for purposes of applying the provisions of sections 401 through 404 to such individual. Thus, if a qualified plan is established for one trade or business but not the others, the individual will be considered an employee only if he received earned income with respect to such trade or business and only the amount of such earned income derived from that trade or business shall be taken into account for purposes of the qualified plan.

 

[steverenner]

Thanks Kevin.  As I expected.  

[Calavera]

Not sure what is the correct way. It is definitely a safe way to count earned income as the net. However there is a view that negative income should be treated as zero. So could be subject to facts and circumstances. There are several paragraphs about it in ERISA outline book.

[Mike Preston]

I think it counts for 415, whether adopted or not.

[Kevin C]

Mike, I hope not.  Would you care to elaborate?

 

Compliance with section 415 is required under 401(a)(16), which I hope means the reg quoted above that applies for 401 applies for 415 as well.