When is it tax advantageous for the firm to pay salary instead of an equivalent pension contribution?
Answer to relevant QuestionsWhat are the nontax costs associated with providing pension benefits for employees? What role does the actuary play in deciding on whether the fund is overfunded or underfunded? How does this role affect dynamic tax-planning strategies for the pension fund? Suppose taxpayers were given a new option under the tax law for retirement funding. The new option requires that they forego a current tax deduction for pension plan contributions. Any contribution would accumulate in the ...Does your answer to the prior question depend on whether the investment funds come from earnings and profits or from new investment dollars? Explain. Michigan Motors is a U.S. corporation with $1 billion of U.S.-source income. In addition, Michigan Motors owns 60% of Detroit Parts, a U.S. corporation with a total of $200 million of U.S.-source in- come, and 100% of Air ...
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