What is the net income to use for pension?

Hi

I have a confusing situation I have never seen it before.

John, LLC (filing as a single member) provided me with the 2021 schedule. This is the entity sponsoring the pension plan.

I was just informed that, the LLC is a 16% partner in a totally unrelated entity (assume no CG and ASG issues at this time). 

Net C amount was 150k but the K-1 received from the partnership show loss of 50k income. This loss was not reflected on the schedule c.

When I was provided the SE tax form, the SE calculations were based on 100k.

Has anyone seen a situation like this?

Currently I have no other information and asked about the nature of the partnership income.

What am I missing here and what should the income be for pension purposes?

Thank you

When in doubt I generally rely on the number used for SE tax calcs.  But I can see where you'd have a situation, like this, where you can have a loss from a different entity that would affect the SE tax calcs but not actual profits of the business sponsoring the plan.  What I don't understand is how the LLC could have the partnership interest but not show the loss.  I'd probably ask the accountant to clarify that but I'd lean towards using the full 150k, on the premise that the LLC isn't really the owner of the other partnership interest, at least as far as it is being treated for tax purposes.  I don't know if that means something is fraudulent or just stupid (and fraudulent?) but if you point out the contradiction and ask someone to tell you what the business profits really are I think you've done all you can do.

They are unrelated employers per your post (no CG or ASG) so use the Schedule C from the Single Member LLC less 1/2 the self employment taxes reported by the CPA as your starting point. The loss in the unrelated partnership reduces his overall income for calculating the SE tax is all so he has a smaller deduction to income for the "employer portion."

Thank you both but I am not sure if the reduced se should be. It is higher on the net c I.e. lower deduction.

 I did ask all those questions to the cpa, waiting to hear.

If the John LLC owns the partnership interest, the loss on outside K-1 reduces SE earnings for retirement plan purposes.

A good way to think about this -  if John LLC was a partnership with $150k of net income (before the K-1) and the outside K-1 reduces income by $50k, there would only be $100k left to report to partners as income.

You situation is not that unusual - it is just the income is reported on 2 different forms on the Form 1040.

So you still use 150k of schedule c but adjusted with the lower se tax? Not sure about this. I agree it should be 150k figure for pension though. Hmmm.

I think income for retirement plan should be $100k less 1/2 SE tax.