Lisa Beth Levine - Page 14

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          A.   Deductibility of Contributions to Simplified Employee                  
               A simplified employee pension is a qualified plan pursuant             
          to which an employer makes direct contributions to its employees’           
          individual retirement accounts or individual retirement annuities           
          as defined under section 408(a) and (b).  Sec. 408(k).  Section             
          404(a)(8) permits an employer to deduct certain contributions to            
          a simplified employee pension.  Individuals who have net earnings           
          from self-employment (as defined in section 1402(a)) are treated            
          as their own employers under a simplified employee pension plan.            
          See secs. 401(c)(4), 408(k)(7).  Section 1402(a) defines “net               
          earnings from self-employment” as the gross income derived by an            
          individual from any trade or business less deductions                       
          attributable thereto.  Section 1402(c)(2) provides that                     
          performance of services as an employee does not constitute a                
          trade or business for purposes of self-employment income, except            
          for certain situations not relevant herein.  See also sec.                  
          1.401-10(b)(3)(i), Income Tax Regs.  Employees include employees            
          and elected and appointed officials of the Federal Government, as           
          well as private-sector employees.  Sec. 31.3401(c)-1(a),                    
          Employment Tax Regs.                                                        

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Last modified: May 25, 2011