MN dhawk Posted June 10, 2008 Report Posted June 10, 2008 I guess the question is: are fiduciary fees for family estates IRA justifying compensation. They are not subject to self-employment tax. Thanks. Quote
kcjenkins Posted June 10, 2008 Report Posted June 10, 2008 Question is still not clear to me? Could you expand it a bit? Quote
MN dhawk Posted June 10, 2008 Author Report Posted June 10, 2008 Question is still not clear to me? Could you expand it a bit? Client acted as fiduciary for 2 seperate estates for his uncle and sister. He took fees of $10,000 total. He wants to put the total into Roth IRA's for himself and his spouse for 2008. Both are over 70 and have no other earned income. I have always entered these non-professional fiduciary fees on 1040, line 21 since they are not subject to self-employment tax. This doesn't look a lot like earned income. Is it earned enough to justify Roth contributions? Thanks. Quote
jainen Posted June 10, 2008 Report Posted June 10, 2008 >>doesn't look a lot like earned income<< I don't have a citation handy, but compensation for purposes of IRA contributions is defined in the code. It includes wages, self-employment income, non-passive partnership income, and certain support payments. Since he is not characterizing his fees as income from a trade or business, they do not qualify for the contribution he wants to make. Quote
kcjenkins Posted June 10, 2008 Report Posted June 10, 2008 I agree, either he's in the business of acting as a fiduciary, in which case the income is subject to SE tax, or he's not. If he's not in a business, the income does not qualify for earnings eligible to contribute to a ROTH. Nor do I think that acting as the fiduciary for two relatives would qualify him as 'in business' with a profit motive. I'd strongly advise the client to forget that one. Quote
jainen Posted June 10, 2008 Report Posted June 10, 2008 >>advise the client to forget that one<< I wouldn't go that far. Find out why he wanted the money in a Roth. The usual answer is tax-free earnings, plus ability to designate a beneficiary. Both of those goals are easily obtainable with greater flexibility and lower fees through traditional investment and estate planning strategies. Quote
kcjenkins Posted June 11, 2008 Report Posted June 11, 2008 You make a good point, which I overlooked in focusing just on the Roth issue. Quote
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