A client who is the 100% owner of a medical practice has historically also owned 100% of a real estate partnership with no employees and no W-2s. The medical practice has a cross-tested profit sharing plan in place in which the owner maxes out his contribution each year. In 2006 a new, full-time employee was hired by the real estate partnership. The owner still does not recieve a W-2 or any salary fro the real estate partnership, only K-1 income.

I believe this is now a brother-sister type of controlled group situation and the employee of the real estate partnership needs to be included in the testing for the profit sharing plan sponsored by the medical practice, is this correct?

Can the real estate partnership adopt the same plan sponsored by the medical practice as a related employer and the new employee be covered or does a separate plan for this one employee need to be created, sponsored solely by the real estate partnership?

What other consequences are there to the hire of this new employee?

Have real estate company adopt the medical company's plan. Then ee can participate. Am curious - 100% of a partnership? Sybil would fit right in.

I noticed that too, but according to the accountant it is a partnership... ?!

Thanks - by having real estate co adopt, then all testing and coverage issues will be addressed, correct? This is exactly the answer I was hoping for!!