Advanced Underwriting Consultants

Question of the Day – May 12

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client is paying a fee for a financial planner to manage his investments, including a deferred annuity.  The fee for management is being deducted from the annuity account.  Is that fee considered to be a taxable distribution from the annuity?

Answer: Yes.  Fees deducted from a nonqualified annuity to pay for managing the account are taxable distributions subject to the 10% penalty tax, if applicable.

A fee for managing a taxable account is a potentially tax-deductible expense if

  • The taxpayer itemizes and
  • All miscellaneous expenses (including the fee) exceed 2% of AGI.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.