Michael T Wing CPA wrote:

- quote -

covering for Congress via the Publications <grin> .
Generally that's not the bias of those documents...

--
Ed Zollars, CPA
Phoenix, Arizona

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Michael T Wing CPA wrote:

- quote -

As you note, that's an interesting question <grin> , since
the Roth is only "potentially" tax exempt. Section 265
applies to tax exempt income specifically, but in recent
years Congress has created a number of "potentially tax
exempt" vehicles (think about paying for advice on where to
put 529 plan funds or whether to roll from one 529 plan to
another <grin> ).

That said, I think the position that they are deductible is
one that is clearly reasonable enough to allow me to sign
the return with that position taken. Of course, I would
advise a client that the IRS might not agree, but I
certainly don't see this as a radically "out there" position.

Of course, much of this may be completely academic in most
cases, due to the 2% of AGI limitation or, if you have lot
of miscellaneous itemized deductions, the fact they aren't
deductible for AMT purposes <grin> . So the number of
returns where it will make a real difference may be mighty
small.

--
Ed Zollars, CPA
Phoenix, Arizona

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Ed Zollars, CPA <ezollar[at]mindspring.com> wrote:

- quote -

As a (rare) exception to that, how about the references to
frequent flyer miles in Pub 553 (Rev 2/03). <g
MTW

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Frank S. Duke, Jr. wrote:

- quote -

There's big difference between tax exempt and tax deferred.
Section 265(a) bars a deduction for expenses paid related
to *wholly* tax exempt income. Now, while Section 265
specifically overrides Section 212, it only does so for
income that will never be taxed.

Section 212(2) provides for a deduction paid for the
"management, conservation, or maintenance of property held
for the production of income" which would generally allow a
deduction for expenses related to the retirement account
(whose point *is* to eventually provide income). And, as
noted, Section 265 is not applicable since the income is
merely tax deferred, not tax exempt.

It is important to understand the IRC provisions that create
the "rules" that CPAs and EAs tend to spend most of our time
working with. Once you look at Section 265, the answer is
crystal clear. But if you simply try to "reason" it out
based on the "rule" you learned out of a quick answer book,
it's easy to come to the wrong conclusion.

By the way, if you want some indication that the IRS buys in
to the position I mentioned above, see IRS Publication 529.
While clearly not authoritative, I would note that the
Publications rarely are known for taking aggressive
positions that reduce tax by pushing the limits of the IRC
<grin> .

--
Ed Zollars, CPA
Phoenix, Arizona

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Frank S. Duke, Jr. <dukefs[at]one.net> wrote:

- quote -

Tax deferred is not tax exempt.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Frank S. Duke, Jr. <dukefs[at]one.net> wrote:

- quote -

In the case of a traditional IRA, the income is simply tax
deferred (it is not tax free). Therefore, the deduction
seems appropriate. Assuming you are a cash basis taxpayer,
you recognize income when received and deductions when paid.
Who cares if those events are (say) 50 years apart! <g
The better question would be as to whether expenses related
to Roth IRAs are similarly deductible. I've never heard
(convincingly) that they aren't. Perhaps a point worth
noting is that the Roth income is only tax free IF certain
conditions (age, holding period, whatever) are met. This
differs from tax exempt interest income, for example.

MTW

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I have always "heard" that IRA maintenance fees and
investment management fees could be deducted as Misc.
Itemized deductions subject to the 2% of AGI limitation if
they were paid directly but not if they were deducted from
the IRA.

This sounded logical until I thought about it some more.
Wouldn't these fees be fees for earning tax free (at least
tax deferred) income? Why would they be deductible at all?
None of the income currently being produced is taxed.

This is an important question if a client has a $2,000,000
conduit IRA from a profit sharing plan and is paying an
investment advisor 1% per year.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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