Debby is a self-employed accountant with a qualified defined benefit plan (a Keogh plan).She has the following income items for the year:
What is the maximum amount Debby can deduct as a contribution to her retirement plan in 2012,assuming the self-employment tax rate is 15.3%?
A) $9,235.
B) $12,000.
C) $50,000.
D) $55,761.
E) None of the above.

Question

Debby is a self-employed accountant with a qualified defined benefit plan (a Keogh plan).She has the following income items for the year:
 What is the maximum amount Debby can deduct as a contribution to her retirement plan in 2012,assuming the self-employment tax rate is 15.3%?
A) $9,235. 
B) $12,000. 
C) $50,000. 
D) $55,761. 
E) None of the above.

Quizplus · Accepted Answer

The maximum amount Debby can deduct as a contribution to her Keogh plan for 2012 is the lesser of 25% of her self-employment income or $50,000. Calculating 25% of her self-employment income ($120,000), we get $30,000. Since $30,000 is greater than $50,000, the maximum amount Debby can deduct is $50,000. Therefore, choice C is the correct answer.

Debby Is a Self-Employed Accountant with a Qualified Defined Benefit