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T9-Chp-15-1-Entity-Choice-Other-Considerations-2009

T9-Chp-15-1-Entity-Choice-Other-Considerations-2009 -...

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1 Chapter 15 Entity-Choice-Other- Considerations. Howard Godfrey, Ph.D., CPA UNC Charlotte Copyright © 2009, Dr. Howard Godfrey Edited November 24, 2009. T9-Chp-15-1-Entity-Choice-Other-Considerations- 2009
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3 Introduction Other Tax Liabilities Compensation Plans Income Tax Credits Qual. & Non-qual. Pensions Alt. Minimum Tax Other Pension Plans AMT Computation Distributions International Tax Penalties Global U.S. Tax Planning Commentary Tax Treaties Stock Options Structure-For. Ops Reasonable Compensation Nonresident Alien Planning Foreign Corp. Foreign tax credit Entity-Other Considerations
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4 Compensation Plans - 1 Qualified & Non-qualified Pensions Other Pension Plans Distributions Penalties Planning Commentary
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Introduction There are two major areas in which tax issues play a major role in deciding the business form of an organization Employee compensation Pension plans Stock options Fringe benefits Tax liability Tax credits Alternative minimum tax International Considerations
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Deferred Compensation Plans Deferred compensation plans are designed to encourage employers to donate toward employees’ retirement funding. General tax consequences are: Employers take a current deduction for the amounts contributed Employees may defer recognition of income
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Employee Pension Plans Contributory versus noncontributory Qualified versus nonqualified Contributions made to nonqualified may not be deferred or deducted To be qualified, a plan must Cover workers 21 or older Be in writing Be made to a trust Be made exclusively for the benefit of employees Not discriminate in favor of highly paid employees Limit the amount of allowed contributions and/or benefits
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Employee Pension Plans Defined contribution versus defined benefit Defined contribution plans ( money purchase plan or profit-sharing plan ) have limits on the amount of contributions made limited to the lesser of $46,000 or 25% of taxable compensation Defined benefit plans have limits on the amount of retirement benefits paid Cannot exceed the smaller of $185,000 or 100% of average of the highest 3 years’ compensation
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Other Pension Plans - Keogh Designed for self-employed taxpayers not covered by an employer’s plan For self-employed or owner-partner Defined contribution plans Employees: lesser of $46,000 or 25% of compensation Owners: lesser of $46,000 or 20% of net SE income up to $230,000 Defined benefit plans Maximum payment limited to $185,000 or 100% of average compensation for the highest 3 consecutive years
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Individual Retirement Accounts Open to all taxpayers Two kinds Conventional (Traditional) Roth Total contributions to all IRAs may not exceed $5,000 per person per year Taxpayers age 50 or older may contribute up to $6,000
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Traditional IRA Contributions limited to lesser of $5,000 ($6,000 if age 50 or older) or amount of earned income Married filing joint may contribute up to $10,000 ($12,000 if 50 or older) total Fully deductible if not covered by an employer’s plan
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Begins Ends Married $85,000 $105,000 Unmarried $53,000
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