Tessa is a self-employed CPA whose 2016 net earnings from her business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $400,000.What is the maximum contribution that Tessa can make on her behalf to her H.R.10 (Keogh)plan in 2016?
A)$100,000
B)$80,000
C)$66,250
D)$53,000

Question

Quizplus · Accepted Answer

The maximum contribution that Tessa can make on her behalf to her H.R.10 (Keogh) plan in 2016 is $53,000. This is calculated as follows: Tessa can contribute up to 20% of her net earnings from self-employment, which is $80,000 ($400,000 x 20%). However, this contribution is subject to a limit of $53,000, which is the maximum contribution that can be made to a Keogh plan in 2016. Therefore, choice D is the correct answer.

Tessa Is a Self-Employed CPA Whose 2016 Net Earnings from Her