Investment Management fees

[John3cpa]

Management fees appearing on the broker statement, deducted from the account not paid by check from investor's separate funds...misc itemized deduction? Fidelity's "legal dept" says no to client when asked. If they are right, what then about margin interest? I'm sure that this is "investment interest" (subject to it's limits).

"What say you"?

[Dervis]

Management fees

If this is a tax-deferred account, then the fees are not deductible unless they are paid with outside money.

If this is not tax-deferred, e.g. a "wrap" account where the fees are a percentage of assets charged to the account, then yes, they are deductible under Misc. deductions subject to 2% limit. These are investment expenses.

[George Boutwell]

Management, or commissions?

I have several clients who pay a percentage of account value, not for management but for unlimited trading. I put them on Schedule D, where they reduce capital gains, rather than Schedule A, where they are worthless because of the 2% limitation. These are accounts for which the investor makes all the decisions. There are also managed accounts where there are numerous trades of small numbers of shares -- the kind that provoke discussions on whether each one has to be transcribed onto a Schedule D. At least one major brokerage house has suggested that a part of these can be claimed as commissions and not investment advice (without being too specific about how to make the allocation).

I agree that if the funds are paid from an IRA or other retirement account, there is no deduction and no 1099R for the "distribution."

[jainen]

their wise guidance

>>Fidelity's "legal dept" says no to client when asked.<<

Obviously your client's advisors know what they are talking about. Just look at how fabulously wealthy he has become under their wise guidance!

[Davc]

Management fees appearing on the broker statement, deducted from the account not paid by check from investor's separate funds...misc itemized deduction? Fidelity's "legal dept" says no to client when asked. If they are right, what then about margin interest? I'm sure that this is "investment interest" (subject to it's limits).

"What say you"?

1. Not deductible if it's an IRA account.

2. Most of the time "margin interest" is not investment interest. It's a mislabeled general line of credit.