I can’t quote the exact language from Judge James S (“Big Jim”) Halpern’s off-the-bencher in Kenneth G. Kozimer, Docket No. 13547-20S, filed 7/10/23, because the Genius Baristas have again issued the transcript in uncuttable format.

Briefly, Judge Big Jim disallows Ken’s pre-TCJA Section 212 deduction of $22K for custodial fees charged against his IRA. Judge Big Jim says Ken didn’t prove that he, rather than the custodian of the IRA, paid the fees from the IRA.

I think Judge Big Jim got it wrong: if Ken wants the deduction from this tax-favored vehicle, he has to take a distribution in that amount and then pay the fees himself. But if Ken is neither older than 59-1/2 years of age, nor a beneficiary of The Law of Fifty and Five, he’s got the 10% whatever-it-is, so he’s worse off claiming the deduction than letting it ride and hoping either he earns it back or his MRDs are lower whenever he has to take them because his balance is lower.

In any event, the rationale that the custodian paid the fees from Ken’s balance is no different than when I write a check and my bank, as custodian of my money, pays the check. If the issue is the tax-favored status of IRAs, then deemed distribution defeats the deduction.