What is the income tax treatment for ADR fees?
I am interest in learning about how to classify the deduction. Is it added to the cost basis of the ADR or must it be deducted as an itemized deduction along with other investment management fees. Is it treated differently if withheld from dividends as opposed to being charged directly to your investment account?
- BobbieLv 79 years agoBest Answer
You already know the correct way that the ADR investment fees are only deductible
on your 1040 tax form on the schedule A itemized deduction as a limited investment expense deduction.
- Anonymous9 years ago
ADR fees ARE investment expenses, deductible in the year paid. If you don't itemize deductions, you lose the tax benefit. [But then the standard deduction gives you a BIGGER benefit].
You do not add them to cost basis because they are an investment expense of income and not a purchase expense.
- CarlaLv 44 years ago
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You are completely over-thinking a simple issue. No need to deal with the PFIC nonsense. You clearly want to invest outside of US dollars. ADRs have full currency exposure even though denominated in USD. The investment return is no different than buying foreign ordinaries, just much simpler to buy/sell and for tax purposes. Look at the arbitrage equation and you clearly see 100% FX exposure. ADR price = OrdinarySharePrice * FX_rate * ADR_to_Ord_Ratio Most international mutual funds and ETFs work the same way. The returns are the local ordinary returns with full currency exposure. It is pretty rare to find one that is currency hedged.
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- 5 years ago
As far as my understanding goes. Is that it is normally taking from the dividend before the dividend is given to you. However, you yourself cannot take it off your dividends if the holding company decides to charge a separate ADR FEE. So, unless you have a lot of itemize deductions greater than the standard deduction, then your stuck holding the bag and can't write it off.
- troLv 79 years ago
investment expenses can be used in itemized deductions