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The unemployment compensation benefits petitioner received
were paid to him by a Federal or State agency, not for any work
or personal services performed by petitioner, but particularly
and solely because of petitioner's lack of employment and
inability to earn salary or wages due to the lack of employment
opportunities. Section 1.219-1(c)(1), Income Tax Regs., provides
in pertinent part that the term "compensation" means wages,
salaries, professional fees, or other amounts derived from or
received for personal services actually rendered. Petitioner's
unemployment compensation benefits were not paid to him for
personal services actually rendered. Accordingly, the Court
holds that unemployment compensation benefits, since such
benefits are not paid for personal services actually rendered,
does not constitute "compensation" within the intent and meaning
of section 219(b)(1)(B). Thus, petitioner's allowable IRA
contribution deduction for the year in issue is limited to
$306.26, the amount of his taxable wages during 1992.
At trial, petitioner referred the Court to the Internal
Revenue Service (IRS) 1990 instruction booklet for Form 1040 and
the following statement in that booklet on which he relied in
considering his unemployment compensation benefits as
"compensation" for purposes of his IRA contribution: "NOTE:
Supplemental unemployment benefits received from a company-
financed supplemental unemployment benefit fund are wages.
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Last modified: May 25, 2011