The compensation paid by Purple Corporation to the participants of a profit sharing plan in 2019 was $38,300.During 2019, Purple contributed $10,000 to the plan.Purple's deductible amount for 2019 is what amount, if any?

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Quizplus · Accepted Answer

The deductible amount for a profit sharing plan is the lesser of 25% of compensation or $56,000. In this case, 25% of $38,300 is $9,575, which is less than $10,000, so Purple's deductible amount for 2019 is $9,575.

The Compensation Paid by Purple Corporation to the Participants of a Profit