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That the contribution to the IRA was originally from compensation, and that the Federal (and usually state) income tax on this contribution amount has been deferred until the amounts are withdrawn, does not defer the 'compensation' character of the original contribution amount. Were this not so, individuals could recontribute mandatory minimum distributions such that the IRA would be perpetual and the required distribution would be meaningless.

Perhaps a better example of this is deferred compensation. The argument you raise is best suited to this kind of compensation, as it was indeed 'earned' income subject to employment tax when it was when withdrawn in later years (presumably during retirement) and taxed as ordinary income, shouldn't this be eligible for an IRA contribution? The IRS says no. Not exactly sure why, except perhaps that the contribution one makes to their IRA or retirement plan must be from income they or their spouse earned that year, not income earned in previous years.

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