Allocable share of qualified plan deduction

[ErisaGooroo]

A partnership sponsors a 401(k) Plan.  Partnership consists of multiple partners receiving a K-1.  Three of the partners in the partnership are winding down their practices.  They are still considered equity partners but are paid a percentage of their collections (reported on their K-1s). 

 

Due to some of the partners winding down their practices, the ownership shares have changed mid-year.  For determination of the allocable share of qualified plan deductions for each partner, should I use the beginning percentage or ending percentage found in Part II, Box J?

 

 

 

Any feedback is greatly appreciated!

 

Thank you.

[mphs77]

I would be tempted to ask if there is a partnership agreement as to the allocation of pension costs for the year.

[ErisaGooroo]

Good point but I thought we were required to use the percentage found at Part II, Box J to determine the allocable qualified plan deduction for each partner?

[Bird]

1 hour ago, ErisaGooroo said:

Good point but I thought we were required to use the percentage found at Part II, Box J to determine the allocable qualified plan deduction for each partner?

As you note they are different at beginning at end.  I don't believe there are any calcs on the K-1 that use either number; it is just informational (but I'm not an accountant and don't prepare them so could be all wet, but I remember trying to tie different numbers out at some point and learning that almost nothing ties to anything).

You are talking about contributions for non-partners, right?  I doubt anyone thought that through so someone (else) is going to have to make a determination on that. I'd think some kind of average partnership percentage for the year is fair.

[Larry Starr]

12 hours ago, ErisaGooroo said:

Good point but I thought we were required to use the percentage found at Part II, Box J to determine the allocable qualified plan deduction for each partner?

Absolutely NOT required.  The partners can use any allocation method that they have agreed to, and it is not even required that such agreement be in writing.  I believe my original outlines on SE Comp calculations included a discussion of that issue (but I'm home now and the outlines are at the office so I can't confirm).

[ErisaGooroo]

Thank you Larry Starr and Bird for the feedback.  Much appreciated!