Archive for October 27th, 2008
Qualifying for IRAs
Posted by taxguru on October 27, 2008
Q-1:
Subject: sep ira tax calculations
can profit distributions to an owner of an s corp. be used to calculate contributions to a sep ira?
A-1:
No it can’t.
Only earned income that is subject to Social Security tax is eligible for the SEP earning test. Since S corp net profit on a K-1 is not subject to any SS tax, it doesn’t count towards SEP-IRA eligible income.
Whether or not it makes sense for you to intentionally restructure your S corp income in such a way so as to pay in some SS tax and thus make it possible to use that income as a means of qualifying for a SEP-IRA contribution is something you need to work on with your professional tax advisor. It may or may not be counter-productive to do that.
Good luck.
Kerry Kerstetter
Q-2:
kerry can someone have a sep ira and a roth ira or any other retirement combination with a sep ?
A-2:
You can simultaneously have several types of retirement accounts. The tricky part comes in determining which ones you are allowed to contribute to each year.
Rather than ask me about each potential combination of plans, the more efficient approach would be to work with a professional tax advisor to run each of the scenarios until you find one that suits your unique situation and goals.
Good luck.
Kerry Kerstetter
Posted in Retire | Comments Off on Qualifying for IRAs
Gifts made after death?
Posted by taxguru on October 27, 2008
Q:
Subject: gifting
In the year of death can the surviving spouse make a $24000 gift to her daughter after her husband has passed away? She gets to claim him as an exemption in 2008 even though he died Jan 2008.Can she still use his annual gift exclusion to make gifts in 2008 after his date of death?
A:
What you are proposing is not allowed. Once a person passes away, s/he can no longer make gifts or use the Gift Splitting option between spouses. Any transfers of assets owned by the deceased will need to be treated as a distribution of estate assets.
Even though the widow can’t exclude the full $24,000 gift, the additional $12,000 can still be given tax free as part of her one million dollar lifetime exclusion, which may or may not make sense depending on the potential size of her taxable estate.
A qualified professional tax advisor should be consulted to work out the most sensible strategy.
Good luck. I hope this helps.
Kerry Kerstetter
Posted in Gifting | Comments Off on Gifts made after death?
Tax Guru - Ker$tetter Letter 