Description
Complete the following. In these problems, apply your knowledge of the rules and laws associated with retirement and other tax-deferred plans and annuities.
- Problem 54, page 11-38.
- Problem 55, page 11-38.
- Problem 59, page 11-39.
- Problem 61, page 11-39.
- Problem 63, page 11-40.
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Explanation & Answer
Attached.
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Running Head: TAX-DEFERRED PLANS AND ANNUITIES
Tax-Deferred Plans and Annuities
Student’s Name
Institution
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TAX-DEFERRED PLANS AND ANNUITIES
Tax-Deferred Plans and Annuities
Problem 54:
Determine the maximum contribution that can be made to a Keogh plan in each of the
following cases. In all instances, the individual is self-employed, and the self-employment
tax reduction has already been taken.
a. Self-employment income of $51,000.
b. Self-employment income of $51,000 and wage income of $30,000.
c. Self-employment income of $125,000.
d. Self-employment income of $290,000.
Solution
The maximum Keogh contribution is limited to $45,000 or 25% income earned from selfemployment after contribution. Formula= X=SE income-25% of x.
a. The amount of income after the contribution is $38,250. The maximum Keogh can
contribute is $12,750 (25% of $51,000).
b. The amount of income after contribution will be the same as question a) above because
the wage income is not included in the plan; the plan is for self-employment income only.
c. The amount of income after the contribution is $93,750. The maximum Keogh contribute
is $31,250 (25% of $125,000).
d. The income exceeds the $225,000 maximum; therefore, the amount of allowed selfemployment income after the Keogh's contribution will be $180,000 based on $225,000
and not the $290,000. The maximum contribution by Keogh is $45,000.
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TAX-DEFERRED PLANS AND ANNUITIES
Problem 55:
Ken is a self-employed architect i...