Is an executor fee, which is reported on a 1099-MISC and not subject to SE tax, considered compensation for purposes of determining deductible IRA contributions?

Compensation must be from carrying on a trade or business. Assuming the executor fee is a one time event, therefore "not carrying on a trade or business" no IRA contribution is allowed. During my research I found clergy not subject to SE tax are allowed an IRA. So SE taxation is not the issue.

Hi Misty,

In my opinion the Executor's Fee may indeed qualify under the definition of compensation for IRA purposes.

According to IRC Sec 219(f)(1) and 401©(2) compsensation means "wages, salaries, or professional fees, and OTHER AMOUNTS RECEIVED FOR PERSONAL SERVICES RENDERED...."

Having served as an Executor I can attest that this is ACTIVE Income as contrasted with PASSIVE income which is not permitted for IRA purposes.

Twenty years of IRA consulting have taught me not to be too certain and to use caution in rendering a judgement on this kind of matter where the customer may eventually come back to blame you if it does not work to their advantage.

Just another opinion and hope it helps.

Dave H.