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My understanding is that tribal members of a federally recognized tribe who receive income from 1040 on Line 21 as :INDIAN GAMING PROCEEDS, INDIAN TRIBAL DISTRIB, NATIVE AMERICAN DISTRIB receive a 1099B. Subject to Fed Income tax, but not state.

I want to confirm such members can use this income for an IRA contribution, which must be classifed as "earned income".

Thanks!

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Leaning toward NO for the amount received via 1099-MISC for Tribal Distributions and listed on 1040 Schedule 1 line 21 as:

  • INDIAN GAMING PROCEEDS
  • INDIAN TRIBAL DISTRIB
  • NATIVE AMERICAN DISTRIB

The section on Compensation in Pub 590-A Contributions to Individual Retirement Arrangements (IRAs) lists out what is and is not considered compensation:

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

  • Earnings and profits from property, such as rental income, interest income, and dividend income.

  • Pension or annuity income.

  • Deferred compensation received (compensation payments postponed from a past year).

  • Income from a partnership for which you don’t provide services that are a material income-producing factor.

  • Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b.

  • Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

So unless you actually worked to receive your distribution, I would argue that tribal distributions are probably closer to a Pension or annuity income.

  • Thank you Morrison! I was considering a Roth IRA. This is the only thing I found. In Hall v. CIR, T.C. Memo. 1998-336, the United States Tax Court considered the taxation of fishing rights-related related income contributed to an IRA. The court held that a deposit of fishing rights-related income into an IRA does not change the character of the funds. Amounts contributed cannot be deducted at the time of contribution and are not taxable upon withdrawal. The amounts earned on the contributions, however, are subject to taxation upon withdrawal. But this is not fishing rights. Thanks again. – Lawrence Dec 28 '19 at 5:51

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