Trading Foreign Stocks in an IRA

[matjone]

I have an IRA that I was switching to Fidelity, but I have been told that the commission for trading on a foreign exchange is about 130 bucks on the low end.  This is a lot more than I'd like to pay.

 

Does anyone know of a broker with access to foreign exchanges that charges a more reasonable rate within an IRA (Other than IB)?  Thanks,

[oddballstocks]

I believe IB is the only one, any reason you're not satisfied with their international trading inside an IRA?

[oddballstocks]

Worth noting as well, purchased a Swiss stock in my Roth a few years back, cost me $80, $50 for non-DTC cleared and $30 for the over the phone broker trade.

[matjone]

I like IB, only problem is the lack of access to certain markets.  Fidelity has access to a lot of european markets that IB doesn't. 

 

I don't want to pay that high of a commission.  I guess it's one of those cases where you need to have money to make money.

[DoddDisciple]

Dumb question. Why would you want to hold a foreign stock in an IRA? You can't then offset any foreign taxes, right? However, this is only relevant when it comes to dividend-paying issues isn't it?

 

For example, if you buy a non-dividend paying French stock (which has a 30% withholding) and sell for capital gains, is there any difference in what you can get on your tax return between holding it in an IRA and taxable? What about all those other fees that Fidelity seems to like to charge, such as 1% "stamp tax" for buying a foreign stock?

 

Worth noting as well, purchased a Swiss stock in my Roth a few years back, cost me $80, $50 for non-DTC cleared and $30 for the over the phone broker trade.

 

Wow. That's part of the reason I'm exploring IB. That's $160 going in. What would they charge when you want to sell? You'd have to put $32k into that stock to keep transaction costs at half a percent going in.

 

Any reason why you wanted to hold this stock in your IRA vs taxable?

[watsa_is_a_randian_hero]

I like IB, only problem is the lack of access to certain markets.  Fidelity has access to a lot of european markets that IB doesn't. 

 

I don't want to pay that high of a commission.  I guess it's one of those cases where you need to have money to make money.

 

I trade almost exclusively through IB.  However, I did open an account with fidelity to trade Portuguese stocks, which IB didn't have access to.  Fidelity charged 19 Euro for the trade, and will charge 1% to change currency.  You can avoid the currency charge by wiring euro to fidelity from IB.  I'll warn you, I did this fx wire 2x, and 1 time there was some trouble, though the funds eventually did make it.

 

I'll second the opinion offered by TTTDodder...I try to avoid foreign stocks in an IRA unless I don't think it will issue dividends.

[DoddDisciple]

Bumping since I have some more questions on the topic and others may as well.

 

I understand the you typically want to hold foreign dividend paying stocks in taxable accounts to take advantage of the foreign tax credit.

 

However, looking at how this is actually set up, it looks like I've overestimated the actual value of this credit. Without the 1116 form, you can get up to $300 if single and $600 if filing jointly. Many of the little fees that foreign exchanges charge, like stamp tax, etc., are only deductible if they are a certain % of income.

 

I'm mainly interested in looking at foreign stocks that may liquidate/go private and issue special one time cash dividends. Are these sorts of transactions subject to foreign tax withholding? I really don't have a problem giving up 50% of some miniscule dividend payment if I can still get most of the liquidation, going private payments, and large one time dividends.

 

Watsa also had a post on here about being charged withholding on an ADR stock. I don't get that. My thinking was that if the stock is OTC or pink, even if it is foreign, there isn't any foreign tax withholding.