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statutory definition of "compensation" has not changed in any
pertinent manner since 1977. Because Miller v. Commissioner,
supra, interprets substantially identical statutory language, it
lends precedential support to preclude entitlement to an IRA
deduction based on investment income. Petitioner's compensation
for the year in issue therefore does not include his capital gain
and dividend income.
Similarly, the IRA distribution received by petitioner is
not includable in his compensation. IRA distributions are not
compensation as they do not constitute wages, salaries,
professional fees, or other amounts derived from personal
services actually rendered. Cf. Miller v. Commissioner, supra;
sec. 1.219-1(c)(1), Income Tax Regs. Rather, they include
amounts derived from earnings from property. Cf. sec. 1.219-
1(c)(1), Income Tax Regs. In essence, IRA distributions are
nothing more than the distribution of principal plus dividends,
capital gain, or other investment income earned on a tax deferred
basis. See secs. 408(a), 72(a).
Further, by statute, the term "compensation" does not
include any amount received as "a pension or annuity" or as
"deferred compensation". See sec. 219(f)(1). An IRA provides
opportunity for private pension coverage in the form of a trust
created for the exclusive benefit of an individual or his
beneficiaries. See sec. 408(a). To ensure that IRA proceeds are
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Last modified: May 25, 2011