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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: Re: IRA & SEVERENCE PAY Date: 1/27/2002 11:03 AM
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Mawhinney asks:

If a person is receiving severence pay paid out in 2002 but not otherwise gainfully employed, are that person & that person's spouse who is not employed eligible to make a 2002 IRA contributions?

The answer to that is "yes" provided your old company doesn't call that payment deferred compensation. You will have to check on that to be sure. Severance pay is taxable income, and it will be reported as such in Box 1 of your W2 for the year. Income properly reported in Box 1 justifies an IRA contribution for the person receiving it as well as that person's nonemployed spouse. See IRS Publication 590 (Individual Retirement Arrangements) available for download at http://www.irs.ustreas.gov/forms_pubs/pubs.html.

Regards..Pixy
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