The $100 is not considered a contribution: the point of the discussion.


"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:4262C49C.6070104[at]paragondynamics.com...
- quote -

NoEd wrote:
- quote -

Tad was referring to 408A which he quoted correctly. See
http://www.irs.gov/pub/irs-tege/irc408a.pdf

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Isn't this argument irrelevant since you cannot contribute $4100 anyway?
And even if you could (catch up contributions, for example) then in
fact the entire $4100 would be deductible?

Just trying to keep up,
-Will

I'm not sure it says that. Here is what I have:

' 408. Individual retirement accounts

(a) Individual retirement account For purposes of this section, the term
"individual retirement account" means a trust created or organized in the
United States for the exclusive benefit of an individual or his
beneficiaries, but only if the written governing instrument creating the
trust meets the following requirements:
(1) Except in the case of a rollover contribution described in subsection
(d)(3) in?[1] section 402 (c), 403 (a)(4), 403 (b)(8), or 457 (e)(16)?[2] no
contribution will be accepted unless it is in cash, and contributions will
not be accepted for the taxable year on behalf of any individual in excess
of the amount in effect for such taxable year under section 219 (b)(1)(A).
(2) The trustee is a bank (as defined in subsection (n)) or such other
person who demonstrates to the satisfaction of the Secretary that the manner
in which such other person will administer the trust will be consistent with
the requirements of this section.
(3) No part of the trust funds will be invested in life insurance contracts.
(4) The interest of an individual in the balance in his account is
nonforfeitable.
(5) The assets of the trust will not be commingled with other property
except in a common trust fund or common investment fund.
(6) Under regulations prescribed by the Secretary, rules similar to the
rules of section 401 (a)(9) and the incidental death benefit requirements of
section 401 (a) shall apply to the distribution of the entire interest of an
individual for whose benefit the trust is maintained.

I will need to reread the revenue ruling but I think it speaks of
deductibility of broker commissions, which is a different than contribution
limits. For example, if I had a contribution of $4,100 for a regular IRA, I
could not deduct the additional $100.


"TB" <borekfm[at]pacbell.net> wrote in message
news:G1j8e.2431$J12.237[at]newssvr14.news.prodigy.com...
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Thanks Will.

I am not saying I definitely right, but I don't see for Roth IRA that
broker commissions count toward the annual contribution.


"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:4261B8A5.300[at]paragondynamics.com...
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TB wrote:
- quote -

The PLR you cited (that differentiates between custodial fees that can
be paid for outside of the IRA and commissions that come from the IRA
assets only - hypothetical portfolio E in the letter) is quite clear
that all the logic applies equally to traditional and Roth IRAs. In its
summary section, it repeatedly refers to IRAs and/or Roth IRAs.

Nice citation. Thanks.
http://www.irs.gov/pub/irs-wd/0507021.pdf

--
Mark Freeland
nBeOwXs[at]pacbell.net

NoEd wrote:
- quote -


The tax code section I was referring to is 408A, which created Roth
IRAs. It begins:

(a) General rule
Except as provided in this section, a Roth IRA shall be treated for
purposes of this title in the same manner as an individual retirement plan.

Sec 408A is silent about a lot of things, it only addresses the things
that are different about the Roth. For example you won't find anything
about Prohibited Transactions, but the IRA rules on that topic still
apply, under the general rule of 408A(a).

I'll flip it around - what's your argument for treating commissions
differently in a Roth?

-Tad

By the way whomever you are, the IRS has said nothing so far. Given your
inability to show a reference after many tries, what should a rational man
think?


"Mark Freeland" <nBeOwXs[at]pacbell.net> wrote in message
news:42616504.6970[at]pacbell.net...
- quote -

As the question was asked before: please show the reference. I will admit I
am wrong IF you can show where broker commissions are not part of the annual
contribution. You couldn't do it before. Sorry.

"Mark Freeland" <nBeOwXs[at]pacbell.net> wrote in message
news:42616504.6970[at]pacbell.net...
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Sorry, looking back through the posts I see that I misunderstood your
point. I thought you were trying to answer the OP's question.

-Will

NoEd wrote:
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Will Trice wrote:
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As I explained to Frank (NoEd) two years ago, when I provided him those
links in a thread he entitled "Broker Commissions". At the time, he
didn't accept revenue rulings as law. Of course Tad is right.

Here's that thread (my post with the citations is #7).
http://groups-beta.google.com/group/...4b93a067c718c/

- quote -

--
Mark Freeland
nBeOwXs[at]pacbell.net

Will,

Custodial fees vs commissions is the issue. For Roth IRA it is my
contention commissions are not part of the annual contribution.


"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:42611EBC.5040403[at]paragondynamics.com...
- quote -

I'm pretty sure that Tad is correct, since I've paid custodial fees for
an IRA account from outside the account (unless the firm got the rules
wrong). In any case the law you quote below applies to someone who
tried to add money to his account to cover the cost of the commissions
to buy and sell securities, not an administration fee. Uncle Sugar does
not allow this.

-Will

NoEd wrote:
- quote -

Sorry to differ with you, but I have not seen the revenue rulings and the
code language you refer to. Here is a link to the law:
http://www4.law.cornell.edu/uscode/26/408.html

Here is revenue ruling 86-142 that applies to regular IRAs. Roth IRAs were
created after 1986.

http://www.taxlinks.com/rulings/1986/revrul86-142.htm


I am really interested in being corrected if I am wrong. Please show the tax
code section and/or revenue rulings you refer.

Thanks.




"TB" <borekfm[at]pacbell.net> wrote in message
news:VZc7e.1265$J12.1133[at]newssvr14.news.prodigy.com...
- quote -

NoEd wrote:
- quote -

The revenue rulings that address this with IRAs are broad enough that
they apply as well to Roth IRAs. The tax code section on Roths begins by
saying that Roths are treated the same as IRAs, unless the code says
otherwise (it doesn't say anything different about commissions). And I
can't think of a rationale for treating commissions differently in a Roth.

-Tad

I have yet to be shown that broker commissions for Roth IRA must be
considered part of annual contribution. For regular IRAs they are part of
the annual contribution.


"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:88S6e.1319$t85.153[at]newssvr21.news.prodigy.com...
- quote -


======================================= MODERATOR'S COMMENT:
Please trim the post to which you respond.

Rich Carreiro wrote:
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There was also a recent IRS private letter ruling (PLR 200507021) that
addressed the treatment of management fees paid with non-IRA funds - not
just the custodian fees, but management fees charged by an advisor or in
a wrap account. Under the ruling these payments are NOT considered
contributions to the IRA. PLRs can't be cited as authority by anyone but
the person submitting them, but are generally considered useful IRS
guidance.

This is the scenario where an IRA account is managed for say 1% per
year, but the client pays the invoice for the fee using non-IRA funds,
rather than having it debited from the IRA. The advantage of paying
management fees this way is that it keeps more money in the IRA. The
disadvantage is...well, the same. A retiree with a big IRA may prefer
paying the associated management costs using the IRA's pre-tax dollars.

RE: the OP - I agree with Rich, "vote with your feet" because there are
so many alternatives out there - sounds like you're in the process of
doing so. And keep an eye on your new broker to make sure they don't
nickel & dime you with a change to their expenses after your accounts
are established. When fees change there's typically a period when you
can move your accounts away without paying account-closing fees (which
some brokers assess). But you need to keep up with those little mailing
inserts with "Important Changes to Your Account".

-Tad

mad_pear[at]yahoo.com writes:

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That last part is correct. If you pay the IRA fee via funds
from outside the IRA account, that payment is NOT considered
an IRA contribution (and is in fact a deductible investment
expense).

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I'd be shocked and angry if there were.

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Why on earth should we do that? We're over-regulated enough as it is.

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Why don't you just switch to another broker? It takes very little
effort to do so.

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Good. Competition and a free society in action.

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Yes -- something should be done. People should read account
agreements and ask about fee policies and do some basic research
on brokers before opening an account with a particular broker.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Hello everyone,

My brokerage charges an annual maintenance fee on my Roth IRA account.
The only means to pay this fee is by liquidating current assets in the
account or by transferring funds to the account (which are thus
considered to be a contribution for the current year). After three
different brokerage representatives informed me this was an IRS policy
that nothing could be done about, I was referred to IRS publication 590
which states that "trustees' administrative fees are not subject to the
contribution limit," exactly the opposite of what they were saying.
When I confronted them with this, they said "yes, the IRS will allow
you to prepay the fee and thereby not consider it as a contribution,
but it is the policy of our brokerage not to permit that." What??? My
question is whether there is any law that requires brokerage firms to
allow such fees to be paid from outside the IRA. If not, perhaps we
need to contact our legislators to create one. This seems terribly
unjust and, in my case, results in an immediate 2% loss each year.
Needless to say, I am closing the account and moving my assets to a
different brokerage, but thousands of people have to be affected by
this and something should be done. At least people need to be made
aware that not all maintenance fees are equal. That's my rant for the
day.

Mad