Case Study Questions 1. During the current year, John Johnson received a salary of $16,000 and interest income of $1,200 and contributed $1,600 to his IRA. What amount of the IRA contribution can be deducted in arriving at John's adjusted gross income? Answer: 2. Chris Delbert's employer had a Simplified Employee Pension (SEP) for its employees. Chris' compensation before his SEP contribution was $31,000. What is the maximum amount that Chris' employer can deduct as a contribution to an SEP-IRA on behalf of Chris for 2019? Answer: 3. Albert Hanes, a sole proprietor, had net earnings of $4,500 from self- employment and paid a self-employment tax of $600. What is Albert's maximum self-employment retirement plan deduction for 2019? Answer: 4. AJ and Holly are married and received salaries of $14,000 and $46,000, respectively. If they are both age 25 and file a joint tax return, what is the maximum they can contribute to an individual retirement savings program and deduct for the current year? Answer: 5. Bert Sanders is single and 28 years of age. He earned a salary of $78,000 in 2019 as a computer tech by Bart Company. Bert was covered for the entire year 2019 under Bart's qualified pension plan for employees. In addition, Bert had a net income of $11,000 from self-employment. What is the maximum amount that Bert can deduct in 2019 for contributions to an IRA? Answer: 6. Jane and Ken are married and file a joint return. Ken's salary in 2019 is $144,000 from his employer Karma Corp. Ken is covered by his employer's pension plan. Jane worked part-time and earned $3,000. She is not covered by her employer's plan. The couple do not itemize their deductions. The are both 48 years old and their adjusted gross income is $162,000. What is the maximum that they can deduct for their contributions to their IRAs? Answer: 7. Elsa divorced in 2018 and received taxable alimony of $33,000 in 2019. In addition, she received $2,000 in earnings from a part-time job. What is the maximum IRA contribution that Olga could have made in 2019 in which she could have deducted on her tax return, assuming that she is 34 and everything was completed on a timely basis? Answer: 8. Jack and Jill are 50 years of age and are married filing jointly. Their 2019 adjusted gross income is $114,000, which includes Jack salary's of $127,000. Jill had no income. Neither spouse was covered by an employer-sponsored pension plan. What could they contribute to IRAs for 2019 in order to take advantage of their maximum allowable IRA deduction on their 2019 tax return? Answer: 9. Amber Borke is a self-employed attorney with a self-employment retirement plan that is a defined contribution plan that covers her and three common-law employees. In the current year, Amber has income of $122,000 and three employees have a total of $62,000 in salaries. Amber must contribute $9,000 to the plan for herself. What is the minimum amount that Amber must contribute to the accounts of her employees under the plan for the current year? Answer: 10. For 2019, deductible contributions to a qualified retirement plan on behalf of a self-employed individual whose income from self-employment is $21,000 are limited to what amount
