In 2017, Jindal Corporation paid compensation of $42,300 to the participants in a profit sharing plan and then contributed $12,800 to the plan. Jindal's deductible amount and any contribution carryover are as follows:
A)$0 deductible; $12,800 carryover.
B)$8,460 deductible; $4,340 carryover.
C)$10,575 deductible; $2,225 carryover.
D)$12,690 deductible; $110 carryover.
E)None of the above.

Question

Quizplus · Accepted Answer

The deductible amount for a profit sharing plan is calculated by taking the total compensation paid in the year (in this case, $42,300) and subtracting the contribution made by the employer (in this case, $12,800).

$42,300 - $12,800 = $29,500

So the deductible amount is $29,500.

To calculate the carryover, you need to subtract the deductible amount from the maximum contribution limit. For 2017, the maximum contribution limit was 25% of eligible compensation, up to a maximum of $54,000.

25% of $42,300 = $10,575

$54,000 - $10,575 = $43,425

So the carryover is $43,425 - $29,500 = $13,925.

Therefore, the correct answer is C: $10,575 deductible and $2,225 carryover.

In 2017, Jindal Corporation Paid Compensation of $42,300 to the Participants