For 2022, Taxpayer had small Schedule C with net income and he made a solo 401(k) contribution based on the net income from the business.  Taxpayer also has 20% ownership in a multi-member LLC, in which he materially participates; 2022 k-1 showed net loss and net negative self-employment earnings.  The Schedule C and multi-member LLC are not related. Negative self-employment earnings from k-1 washes out self-employment income from Schedule C so no SE tax is due with the 2022 return.  Is taxpayer allowed to make solo 401(k) contribution based only on Sch C income?  

My initial thought was he shouldn’t be allowed a solo 401k contribution because he doesn’t have net self-employment income. However IRS Publication 560 says “If you have more than one business, but only one has has a retirement plan, only the earned income from that business is considered for that plan.” That makes it seem like he could make a contribution based on the Schedule C income only.