advisor fees
We have a client that would like our fees that we would charge to his Roth account, billed to his Rollover IRA account. Is this a tax problem?
We have a client that would like our fees that we would charge to his Roth account, billed to his Rollover IRA account. Is this a tax problem?
Permalink Submitted by Alan Spross on Fri, 2010-04-16 03:53
Potentially yes. Here is what Natalie Choate, a recognized IRA authority says about this:
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Question: If a client has a traditional IRA and a Roth IRA under management with my firm, can the management fee for both accounts be paid out of the traditional IRA?
Natalie: No. Though an individual can pay his IRA’s separately billed investment management expenses from his own (nonretirement) assets, it would not be proper for the individual to cause the investment expenses of his Roth IRA to be paid by his traditional IRA. The IRS could attack this as a disguised Roth IRA contribution, a prohibited transaction, and/or a taxable distribution from the traditional IRA, any of which would have undesirable tax consequences.
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The next best thing for the client is to split the fees and bill the TIRA for that fee and bill the Roth fee to him outside the IRA. He can then pay the Roth fees from outside funds and his Roth balance will not be reduced. He might also qualify for a misc itemized deduction.
Permalink Submitted by David Herrmann on Fri, 2010-04-16 04:00
Thank you, Alan.