Q:
Which of the following is true for qualified profit-sharing plans?

a) Contributions from the corporation are taxable.
b) Employee benefits are predetermined.
c) Contributions are mandatory whether the firm is profitable or not.
d) All income from the plan's assets are not taxed until received.
e) All of these are true

A:

The correct answer is d

Corporate contributions are deductible to the firm. The benefits depend on the firm's profitability and the profitability of the investments made, and as the name implies, if the firm does not have any profits, there is nothing to share. For example, the firm is not required to make contributions in years when it is not even profitable itself.


Have a Financial Question?

RELATED FAQS

  1. I have a profit-sharing plan with my former employer. I am now trying to buy a home. ...

    Profit-sharing plans are retirement plans with companies that give employees a percentage of the company's earnings. A profit-sharing ...
  2. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ...
  3. I participate in a profit-sharing plan at work. If I retire at age 62, will I be ...

    The money in your profit-sharing account will be taxable when it is withdrawn from the account. You may leave the money in ...
  4. Are catch-up contributions included in the 415 limit?

    Learn about IRC section 415 limit and why catch-up contributions are not included. Learn about current 401(k) contribution ...
RELATED TERMS
  1. Profit-Sharing Plan

    A plan that gives employees a share in the profits of the company. ...
  2. Retirement Contribution

    A monetary contribution to a retirement plan. Retirement contributions ...
  3. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  4. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  5. Nonelective Contribution

    A type of contribution an employer chooses to make to each of ...
  6. IRS Publication 526

    A document published by the Internal Revenue Service (IRS) that ...
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center