Jane is a partner at Smithstone LLP. Smithstone maintains a profit-sharing Keogh plan for its partners and employees. Determine the maximum deductible contribution Jane can make to the plan in each of the following situations:
a.Jane's net self-employment income is $80,000.b.Jane's net self-employment income is $300,000.
What will be an ideal response?
| a. | Her contribution is based on her net self-employment income. Jane can contribute $16,000 ($80,000 × 20%) to her Keogh account. |
| b. | Jane can only contribute $56,000 to her Keogh account. Because 20% of Jane’s net self-employment income of $300,000 equals $60,000 and exceeds $56,000, Jane can contribute the maximum amount of $56,000 to the plan. |
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What will be an ideal response?
In Orkal Industries v. Array Connector, where Orkal bought parts from Array by sending an order form, but Array confirmed with its own form that contained different terms. Orkal did not object to the different terms until litigation arose later at which point the added terms mattered. The courts held that under the UCC:
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