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Crossposted from Folio boards:

Are the annual/monthly fees associated with a Folio account tax deductible? In other words, can I treat these fees just as I would a broker's commission by adding the fee to my cost basis?

Thx,
SG
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<<Are the annual/monthly fees associated with a Folio account tax deductible? In other words, can I treat these fees just as I would a broker's commission by adding the fee to my cost basis?>>

Sorry...I'm not quite sure what you mean by a Folio account. And without knowing about the account, it's difficult to provide an answer.

Tell me a little bit more about this type of account, or provide a link so that I can do some checking up, and I'll be happy to take a shot at your question.

Or...there might be some other Fool who is familar with this type of account that might stop by and respond to your question.

Sorry for the non-answer...
TMF Taxes
Roy

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Roy,

I'm thinking about opening a Foliofn account where instead of trading commissions you pay an annual fee for the account. I know with a regular brokerage account, the trading commission is added to the cost basis of the stock (assumably deductible if you suffer a loss). With Folios, you pay an annual fee and can trade twice daily w/o commissions.

More info at http://www.foliofn.com

Thx,
SG
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Fine and dandy, sgresham, but folks who have not checked out the Foliofn site should be warned that the price of admission is $300 a year or so. This can be a good deal if you have a lot of money to invest or if you trade a lot. The Foliofn people give an example of a portfolio of $70,000. If you only had $7000, that fee would be excessive. If you had $700,000, you'd love it.

I think the tax consequences have to be minuscule. The expenses have to go on Schedule A.
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JBoa,

Excellent point on assessed fee and amount of investment.

Let me ask this: if the Foliofn fees are deductible as an investment expense, would any of the fees I pay to a mutual fund company (say the 1% management or 12-b1 fees) be deductible too?

Much thanks!

SG
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<<Let me ask this: if the Foliofn fees are deductible as an investment expense, would any of the fees I pay to a mutual fund company (say the 1% management or 12-b1 fees) be deductible too?>>

I just quickly reviewed the Foliofn site, and based upon what I see, I would agree with JAB...these would not be commissions (which are added to cost basis or deducted from sales price of the shares), but instead would be a "fee" that would be reported on Sch A as a miscellaneous itemized deduction, subject to the 2% floor.

Which means that many people would not receive any tax benefit since the fee would not be greater that the 2% requirement (assuming no other miscellaneous itemized deductions, of course). Your personal mileage may vary.

With respect to the mutual fund fees, they are a built in component of the purchase or sale. That being the case, they can NOT be treated as "fees". Instead, because they are "built in" you simply maintain your mutual fund cost basis on the amount that you paid for the shares.

Hope this helps...
TMF Taxes
Roy

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Does anybody know?
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Does anybody know?

How you found a thread from 2000? Not me.

Whether flat fees which allow unlimited trades are commissions, which are added to basis, or investment expenses, which are a Schedule A miscellaneous itemized deduction, it's the same as 12 years ago. The latter.

Phil
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