(B) While the individual was a resident

(2) As used in this subsection, “compensation” means the same as in section 219(f)(1), IRC.

(3) An individual’s deduction for contribution to an individual retirement account shall be presumed to be made pro rata from all compensation earned during the taxable year in which the contribution is deductible.

(4) A rollover contribution, as described in section 219(d)(2), IRC, shall not be reduced or disallowed under this subsection.

(5) For rules to determine where compensation is earned, see section 235-34, HRS. Example: In 1994, T earned $30,000 in California while residing there and working for BMI Co. On May 13, 1994, T moved to Hawaii to work for Exrox Co. and earned $20,000 during 1994. After the move, T rolled over the entire BMI Co. retirement plan balance to an individual retirement account (IRA). T established another IRA in Hawaii and contributed $2,000 on April 1, 1995, that is deductible for federal purposes in 1994. T is a part-year resident. Under paragraph (4), T’s establishment of the rollover IRA is not subject to tax. Under paragraph (3), the $2,000 IRA contribution is prorated between all compensation sources. Hawaii compensation is $20,000 and total compensation is $50,000. Thus, $2,000 x ($20,000 / $50,000), or $800, is considered to be from Hawaii compensation and is thus deductible in Hawaii.