LiveTrace doesn't respect transparency/clipping paths?

As you can see in the below image, I've placed a PSD file of a donut with a clipping path into Illustrator. When i do a two color Livetrace, AI converts all the transparency to white, merging them with my hilights. I don't want a bounding box, i want my donut to maintain the same alpha/transparency as before, but i want it livetraced. If i click the "ignore whites" checkbox, AI makes both the transparency AND my whites and throws them away. Is there any way to get livetrace to respect transparency/alpha/clipping paths?
thanks

Ok I understand. What to do is to turn it into a live paint group and manually restore the white that urns transparent with the live paint bucket set to white.
since it is a transparent background if I have this correct place it as a psd and I choose to view as a transparent image you will see that at the bottom of the Live Trace Option, not really certain that is even necessary as it an image place as a psd file on a transparent background.
You can add a blur to smooth the edges.
Or you can, if this is a transparent image in photoshop, select it  turn the selection into a path and save that as a clipping path to use in AI after yu used the Live Trace.
Of course there is the manual method of using the pen tool.

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