When figuring compensation for a self-employed individual for purposes of determining the amount of an allowable contribution to a traditional IRA, which of the following statements is NOT true?

1.Self-employment income must be reduced by the deduction allowed for one-half of your self-employment taxes.

2.When you have both self-employment income, and salary and wages, your compensation includes both amounts.

3.If you have a net loss from self-employment, you must subtract the loss from any salary or wages received when figuring total compensation.

4.In order to include net earnings from a trade or business as compensation, your personal services must be a material income-producing factor.

explanation

If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation.