COMPENSATION DEFINITION. According to the IRS, wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. An amount you receive that is a percentage of profits or sales price is compensation. For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. If you were a member of the U.S. Armed Forces, compensation includes any nontaxable combat pay you received.
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Sources: Traditional Individual Retirement Custodial Account Agreement, Traditional Individual Retirement Custodial Account Agreement