Frank is a self-employed CPA whose 2017 net earnings from his trade or business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $240,000.What is the maximum contribution that Frank can make on his behalf to his H.R.10 (Keogh)plan in 2017?
A)$67,500
B)$48,000
C)$54,000
D)$60,000

Question

Quizplus · Accepted Answer

B)The maximum earned income to be considered is $270,000.The maximum contribution is the lesser of $54,000 or 25% of the earned income from self-employment activities after taking the Keogh deduction into account.To achieve this result,the formula is reduced to 20%; thus,the maximum amount in this problem is the lesser of $54,000 or $48,000 ($240,000 × .20).

Frank Is a Self-Employed CPA Whose 2017 Net Earnings from His