Question of the Week

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


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.

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