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I am about to transfer part of my deductable Traditional IRA at Ameritrade to my Roth IRA at Ameritrade. Because I am under 59 1/2 a "fee of $25.00 will be assessed prior to the distribution of my assets."

I asked if I could include a check for $25.00 with the request, so that the amount of the transfer is not reduced by the amount of the fee, and got the following answer.

"The $25 fee is a distribution fee. Unfortunately, the fee does need to be subtracted from the account. The reason that the fee cannot be sent in is that it would then be considered a contribution to the IRA by the IRS."

I cannot believe that the IRS would consider a fee paid to a custodian a contribution to an IRA. Years ago a previous custodian of my IRA charged an annual maintenance fee, but billed me separately, and encouraged me to pay the fee by check, rather than deduct it from the IRA. It was never considered a contribution.

Does Ameritrade's rationale make sense? Do other brokers charge such a fee? I was planning to make a number of partial conversions over the coming years.
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