Frank is a self-employed CPA whose 2018 net earnings from his trade or business (before the H.R. 10 plan contribution but after the deduction for one-half of self-employment taxes) is $240,000. What is the maximum contribution that Frank can make on his behalf to his H.R. 10 (Keogh) plan in 2018?
A) $18,500
B) $48,000
C) $55,000
D) $60,000
B) $48,000
The maximum contribution is the lesser of $55,000 or 25% of the earned income from self-employment activities after taking the Keogh deduction into account. To achieve this result, the formula is reduced to 20%; thus, the maximum amount in this problem is the lesser of $55,000 or $48,000 ($240,000 × .20).
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