Question

James Blaine is the sole shareholder and president of Blaine foods, Inc., which operates a successful fast-food franchise. Mr. Blaine owns the building and land from which the franchise is operated but the Corporation owns the franchise and leases the building and land from Mr. Blaine. Mr. Blaine is paid a salary of $150,000 a year. He also earns $50,000 per year in interest, dividends, and capital gains on his investment account. Mr. Blaine, age 50, is married and has three children, all of whom are nearing college age. He currently has no qualified plan in place at Blaine foods and would like your help in developing one for 2018 (assume that it is currently September 20, 2018).

The Corporation averages a cash flow of $35,000 to $55,000 net income per year after the owner's compensation. The restaurant is managed by one general manager and two assistant managers who have worked for James Blaine for at least five years. The general manager is paid $65,000 per year and the two assistants average $45,000 annually (all the managers are between 28 and 34 years old). The rest of Blaine's employees can be divided into two groups. Group A (10 employees) are short-term, part-time high school students who will make between $650 and $6,000 during 2018. Group B (12 employees) are over 21 and will earn more than $6,000 in 2018. The total compensation for these two groups for 2018 will be $35,000 and $171,000 respectively. James Blaine would like to increase his savings for retirement beyond his regular IRA contributions. He wants to maximize his tax-deductible contributions, without incurring large expenses for his regular employees, who are likely to remain with the company for only a short time.

James Blaine has asked you the following questions:

1.If in 2018, a qualified profit-sharing plan is established at Blaine foods, Inc., what is the maximum contribution that could be made on behalf of James Blaine?

For this questions are there any calculations that need to be made? or simply adding the IRS's maximum contribution limit answers this question?