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

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Unformatted text preview: 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 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 4 Compensation Plans - 1 Qualified & Non-qualified Pensions Other Pension Plans Distributions Penalties Planning Commentary 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 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 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 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 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 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 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 Begins...
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This note was uploaded on 03/09/2012 for the course ACCT 4220 taught by Professor Burton during the Spring '08 term at UNC Charlotte.

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

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