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Author: RatioFool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Fee for conversion to Roth Date: 11/13/1998 3:09 PM
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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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Author: slwjpw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6604 of 76237
Subject: Re: Fee for conversion to Roth Date: 11/13/1998 4:18 PM
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IMHO - It sounds correct. My former broker also charged transfer fees, however, they were outlined in the original 401(k) agreement that I had signed. You may want to check your agreement.

Thanks, Phil

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Author: SnootFool Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6624 of 76237
Subject: Re: Fee for conversion to Roth Date: 11/16/1998 12:27 AM
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<<Does Ameritrade's rationale make sense?>>

I'm not a tax professional (nor do I play one on TV). I don't know if it's completely analogous, but I know that annual fees charged by an IRA custodian may be paid from outside the account.

<< Do other brokers charge such a fee? I was planning to make a number of partial conversions over the coming years.>>

I can only speak for Waterhouse, who charges NO FEEs of any kind (except $25 to close an account). IMHO, Ameritrade is saying "we don't really want your IRA business."

Chris

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Author: RatioFool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6628 of 76237
Subject: Re: Fee for conversion to Roth Date: 11/16/1998 3:10 PM
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After another exchange of e-mail messages with Ameritrade, I found that they would let me pay the distribution fee separately. I need to include a note along with the fee stating that it is for the distribution fee and is not to be added to either account as an actual contribution.


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