The compensation paid by Green Corporation to the plan participants of a profit sharing plan in 2012 was $38,300.During 2012,Green Corporation contributed $10,000 to the plan.Green's deductible amount for 2012 is what amount,if any?

Question

Quizplus · Accepted Answer

The deductible amount for a profit sharing plan includes both the contributions made by the employer and the compensation paid to plan participants. Therefore, Green Corporation's deductible amount for 2012 would be:

$10,000 (employer contribution) + $38,300 (compensation paid to plan participants) = $48,300

However, there is a limit on the amount of compensation that can be taken into account for plan contributions and deductions. For 2012, the limit is $250,000. Therefore, the deductible amount for Green Corporation would be:

$10,000 + $9,575 (which is the amount of compensation that can be taken into account) = $19,575

This is less than the total amount contributed by Green Corporation, so the answer is not A or D. Option B is incorrect because it only includes the compensation paid to plan participants and not the employer contribution. Therefore, the correct answer is C.

The Compensation Paid by Green Corporation to the Plan Participants