Do profits from stocks count as income.

[Guest]

I am trying to find out if there is a way my 73 year old mother could contribute towards a Roth IRA. She has a small pension, however she has no income from a job. Can the sale of or the profits from the sale of stock be considered income for this purpose?

[BPickerCPA]

She would need earned income. Stock profits are NOT earned income.

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Barry Picker, CPA/PFS, CFP

New York, NY

[John G]

Stock gains are capital gains/losses, and like interest and dividends they DO NOT count as earned income. You need earned income to qualify for a Roth so you need a paycheck or related earnings from commissions or bonuses that would count as earned income. The initial amount of earned income is needed to allow you to open or subsequently fund a regular or Roth IRA. Note, there is also an income ceiling which is based upon total income. If you exceed the income ceiling, then you are not eligible for a Roth. Having earned income qualifies you at the bottom end of the scale, having to much total income can disqualify you at the high end of the range. Two diffent issues.

If she is thinking about estate planning, she can help other family members start or fund Roth or regular IRAs. The family members must still meet the income qualifications. This removes funds from her control. Since the amounts are below the 10,000 annual gift exclusion, these actions would reduce her estate.

[This message has been edited by John G (edited 03-31-2000).]