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I would agree with your Clark Howard friends. Even if this $30K is added as income to your traditional income $23K for tax purposes, your MAGI is not above the thresholds stated earlier to disqualify you for a roth ira for 2007. So I feel competely confident that you are qualified to make that contribution.

My husband inherited a traditional ira from his father and we had to show that as taxable income I believe. However, we also received funds from the sale of his house, but any capital gains taxes on that were paid by the estate prior to us receiving the funds. I'd ask the executor or personal representative of the estate if they've filed taxes on the funds you have recieved to get clarification. Someone else may have a comment as well.