The Different Tax Treatment of Investment Advisory Fees and Brokerage Fees; The Lower the Fiduciary Duty the Better the Tax Consequences


The current tax laws favor brokerage fees as compared to investment advisory fees, even though investment advisors are held to a higher standard of fiduciary duty. My article examines the different tax treatment of investment advisory fees and brokerage fees, analyzes the policy considerations of such treatment and proposes alternatives to the current system. Considering the large number of American investing in the securities markets, it is important that our tax laws be written in a way that encourages taxpayers to seek investment professionals who are held to higher standards of conduct. The policy implications of brokerage fees receiving preferable tax treatment are considerable, yet have been ignored by Congress. This article will hopefully open a debate on the tax treatment of fees that investment professionals charge.


Banking and Finance Law | Commercial Law | Securities Law | Taxation-Federal | Tax Law

Date of this Version

February 2006