pencer Strank reports the following items of income for the current year on a jo
ID: 2646123 • Letter: P
Question
pencer Strank reports the following items of income for the current year on a joint return:
Employee salary $23,000
Interest income $2,000
Net income from consulting $20,000
Self-employment tax paid $2,800
He is a participant in his employer's qualified defined contribution retirement plan and has a non working spouse.
Please answer the following questions:
a. How much, if anything, may Spencer deduct if he contributes the maximum amount on behalf of himself and his wife to a traditional IRA?
b. Same as (a.), but AGI is $112,000.
c. What are the maximum contributions and deduction amounts available to Spencer if he maintains a solo 401(k) plan?
d. What are the maximum contribution and deduction amounts avaliable to Spencer if he maintains a money purchase Keogh plan?
e. What are the maximum contribution and deduction amounts available to Spencer if he maintains a SEP IRA?
f. What are the maximum contribution and deduction amounts available to Spencer if he maintains a SIMPLE 401(k)?
Explanation / Answer
Assumptions:
1. Both are less than 50 years of age
2. No other income and spouse does not earn any income during the year.
Responses for each point is given below
a. Traditional IRA - The maximum contribution is $5500 each and hence $11,000 under traditional IRA.
b. The maximum contribution can be $11,000
c. In 2015, 100% of the owner
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