Deducting Managed Funds fees?

They are investment expenses - Schedule A, 2% haircut.

Ira Smilovitz

And not allowed under AMT.

My guess is NO. Although I am not a tax expert. it seem you are talking fees that never show up as income. That is, the fees result in a reduction of the fund share value. Your income is lowered by that share value reduction and you are not allowed to deduct it again.

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That is what he would like to be the case, but it is not. The fund income is taxed as normal, then the fees are paid with after tax funds. As an expense of producing investment income, the fees can go on Schedule A as previously discussed.

For the typical open end funds I have, the fund pays no tax. The shareholder pays tax on dividends and capital gains. Would it not be to the fund managements benefit to take the fee before distribution of dividends an realized capital gains?

On 2014-03-25 16:10, Salmon Egg wrote: [..]

I'd have to see the specific tax forms and other statements to understand the OP's question in context. I'm pretty sure there is no "managed fund" fee that the taxpayer can directly deduct from a reported dividend or capital gain distribution, at least I've never seen one. Schedule A 2%-misc or nothing.

There are some funds that say they charge no fee. Instead they take a piece of the profit for their services. I think that would fit the situation he was talking about.

Most likely, yes. My point was, whatever is reported on the 1099-DIV is included fully in gross income, the *taxpayer* cannot deduct anything off the top on the Form 1040, only via Schedule A. If the issuer of the

1099-DIV makes an adjustment in coming up with the reported number, we never see that reflected on the tax return. The concern would be to not mistakenly deduct some amount a second time on Schedule A.

Like most tax preparers, I've seen countless 1099-DIV forms, usually with pages of detail listing each amount earned by individual security, and I don't recall ever seeing some deduction shown for fees. The sum of the individual amounts paid is what gets added up for the 1099-DIV.

Again, the shareholder gets less than what he would have if there were no fee. No tax is paid on the nonexistent income. The manager, however, does get income and presumably reports it as such.