Finance Questions? Ask a Financial Expert for Answers ASAP
Thank you for your question. My name is XXXXX XXXXX I will be happy to help you tonight
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The IRS allows you to pay investment advisory expenses to be paid directly out of the IRA account
So, you would not have to take funds out and pay a penalty to pay your friend the investment expense
However the investment advisor cannot be related to you
The investment advisor is not related to me.
Okay ... you cannot have a transaction with a related party or you can disqualify the entire retirement account. But, the account can pay its own investment fees
Wouldn't I take a tax hit of say 40% when I pull out enough to pay him?
Also, I would have to 1099 him, right?
No you are not pulling money out - you are paying an investment expense. If the fee is paid directly to him from the IRA it's not a withdrawal. You are not taxed on this.
Also, you do not have to send him a 1099 unless you are a business. Individuals do not have to file form 1099
I am trading the an IRA investment account - Ameritrade. Would I instruct them to write him a check for his commission fee?
Yes, you would do that. I assume this is a self directed IRA
Yes, it is self directed.
Accounting-wise I really don't need to report anything because it all comes out of my IRA account, correct?
Yes, so you would have them pay him the fee. The IRS allows one of two things; either pay him directly from the IRA, but the fee has to be for investment advisory fees. Either that, or you can pay him yourself and deduct the fees.
So, nothing shows up on your tax return if you pay him directly out of the IRA
Sweet!!! You have been EXTREMELY helpful!!! Can I get you again if I need another question in the next few days? You were great!!
Yes, you can. Let me give you my direct link
Go to that site, enter your question below my picture
And, before you leave tonight, please rate my response as "excellent"
Will do. My friend who is trading might have a question or two for you. Thanks again!
Okay please do come see me again and send them my way. I appreciate it
The rating feature is located along the bottom of your screen. 3-5 gives me full credit for assisting