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Homework answers / question archive / John (age 55 and single) has earned income of $4,500

John (age 55 and single) has earned income of $4,500

Accounting

John (age 55 and single) has earned income of $4,500. He has $31,700 of unearned (capital gain) income.

 

 

a. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2020?

 

b. If he does participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2020?

 

 

c. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2020 if he has earned income of $18,200?

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Part A:

John can claim a deduction of $4,500 if If he does not participate in an employer-sponsored plan.

 

Part B:

John can claim a deduction of the lower of $7,000 or earned income. Hence, he is entitled to get a deduction of $4,500 only, even if he participated in an employer-sponsored plan.

 

Part C:

John can claim a deduction of the lower of $7,000 or earned income. In this case John will be entitled to claim $ $7,000 as the value of deduction.

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