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Subject:  Re: taxes and fund expenses Date:  3/5/1998  11:51 AM
Author:  TMFTaxes Number:  2421 of 127613

[[I feel like such a bonehead asking this but here goes. Are the management and advisors and
advertising fees that mututal funds indirectly charge shareholders tax deductible? ]]

The KEY word here is "indirectly". As you point out, these fees are "buried" in the mutual fund share price. This being the case, they are NOT deductible per se. Just like stock broker commissions that you pay when you buy an individual stock, those "fees" will stay with the mutual fund shares purchased.

[[I asked my
accountant this question and she looked at me like I was from the moon.]]

Don't feel's just that time of the year. Your accountant may have been working on only a few hours sleep. Or, it could have been that you forgot to wear your hat to hide that horn on the top of your head (sorry...just kidding). But don't consider it a bonehead question. It shows good critical thinking skills. Unfortunately, not much critical thinking goes into creating the tax laws.

[[ But it seems to me that if a directly charged broker's comission or margin interest is tax deductible as an investment expense,
these indirect fees ought to be deductible as well.]]

Broker commission no (as I noted above). Broker commission is also not deductible, but is an addition or reduction to the purchase/sale of the stock.

Margin interest is different, and MAY be deductible as investment interest if you qualify for the deduction under the investment interest rules. But it certainly AIN'T automatic. But, as stated before, the indirect fees are NOT deductible.

[[After all, aren't they also expenses associated
with investment? Can anyone straighten me out on this?]]

The are expenses associated with the purchase and sale of the investment..which means that they are added to the cost of the shares. For additional information regarding the tax issues surrounding mutual funds, check out IRS Publications 550 and 564 at the IRS web site.

TMF Taxes

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