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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Earned Income/IRA Date: 4/10/1999 12:28 AM
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[[Okay-here's the critical question: in 1998 the only work I did was as a Trustee
for my Mom's estate (she passed on, left me to deal with the greedy relatives). I
paid myself trustee fees, filled out a 1099-misc. form. Does this income qualify
as "earned income" for IRA purposes?? Do I also have to pay Self-Employment
tax on that amount??]]

The answer is most likley no to the second part of your question (at least I assume that you are not a professional administrator).

All personal representatives must include in their gross incomes fees paid to them from an estate. If paid to a professional executor or administrator, self-employment tax also applies to such fees. For a nonprofessional executor or administrator (a person serving in such capacity in an isolated instance, such as a friend or relative of the decedent), such as a friend or relative of the decedent), self- employment tax only applies if a trade or business is included in the estate's assets, the executor actively participates in the business, and the fees are related to operation of the business.

But the second part of your question is more interesting. Compensation, as defined by Uncle Sammy generally relates to earned income subject to FICA or SE taxes. A quick check of IRS Publication 590 is silent on this specific issue. Another quick review of the regulations and code also leave me scratching my head. My research time is limited right now (only a few days before the 15th), but I would be inclined to think that this income would not be compensation in the IRA sense of the word. True, it is certainly taxable income. And you could make a claim that it was for services rendered. But since it is not subject to SE taxes, it would not be considered "trade or business" income.

But it's an interesting question. If you need the answer before the 15th, I'm afraid that I will not be able to provide it with any comfort. If you would like to wait until after the 15th, I'll be glad to do a little more research and see what I can come up with.

TMF Taxes
Roy
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