Buying and selling stock in a Roth account.

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IndigoE
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Buying and selling stock in a Roth account.

Post by IndigoE »

Is it true that there are no tax liabilities within a Roth account when one sells a stock? In other words are there short term capital gains or penalties if you sell and then buy the same stock back again in a short time (weeks or months)?. I sold a stock, regretted selling it and want to buy it back. (I know, I need more discipline and patience).
GammaPoint
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Post by GammaPoint »

That is correct. Same with any tax-sheltered account.
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retiredjg
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Post by retiredjg »

It is correct as long as the money stayed inside the Roth account. If you took it out of the Roth account, that could be (but isn't necessarily) a different story. And if you took the money out, you can't just put the money back in (unless you are still under your contribution limit for this year).
dbr
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Post by dbr »

I assume, but am not absolutely positive, that the same wash sale issue would apply in a Roth that applies to 401K's and IRAs -- the problem of selling for a loss in taxable and buying back in tax deferred before the 30/31 day exclusion period.

-- just ruminating about theoretically possible tax consequences.
the intruder
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Re: Buying and selling stock in a Roth account.

Post by the intruder »

IndigoE wrote:Is it true that there are no tax liabilities within a Roth account when one sells a stock? In other words are there short term capital gains or penalties if you sell and then buy the same stock back again in a short time (weeks or months)?. I sold a stock, regretted selling it and want to buy it back. (I know, I need more discipline and patience).
Ask yourself the question how is the IRS ever going to find out? There is no reporting of IRA purchases to the IRS any more than the IRS knows if you took your Minimum Required Distribution at 70 1/2.

Or you can wait 30 days before buying it back.
Tramper Al
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Re: Buying and selling stock in a Roth account.

Post by Tramper Al »

the intruder wrote:Ask yourself the question how is the IRS ever going to find out? There is no reporting of IRA purchases to the IRS any more than the IRS knows if you took your Minimum Required Distribution at 70 1/2.
Yeah, it's really only important to adhere to the tax laws if there is a chance you'll get caught if you don't.
livesoft
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Post by livesoft »

Don't forget that even though gains are tax-free, you don't easily get the benefit of losses either. Furthermore, if you use a Roth for trading that you have limited chances to top it back up after your losses.
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SSSS
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Re: Buying and selling stock in a Roth account.

Post by SSSS »

Tramper Al wrote:Yeah, it's really only important to adhere to the tax laws if there is a chance you'll get caught if you don't.
But if a tree falls in the forest and no one hears it, does it make a sound?
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norookie
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Re: Buying and selling stock in a Roth account.

Post by norookie »

the intruder wrote:
IndigoE wrote:Is it true that there are no tax liabilities within a Roth account when one sells a stock? In other words are there short term capital gains or penalties if you sell and then buy the same stock back again in a short time (weeks or months)?. I sold a stock, regretted selling it and want to buy it back. (I know, I need more discipline and patience).

Ask yourself the question how is the IRS ever going to find out? There is no reporting of IRA purchases to the IRS any more than the IRS knows if you took your Minimum Required Distribution at 70 1/2.


Or you can wait 30 days before buying it back.
I believe your incorrect if the amount of funds INVESTED or moved somehow exceeds certain limits. :shock: I may be wrong.
" Wealth usually leads to excess " Cicero 55 b.c
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zblongladder
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Re: Buying and selling stock in a Roth account.

Post by zblongladder »

IndigoE wrote:Is it true that there are no tax liabilities within a Roth account when one sells a stock? In other words are there short term capital gains or penalties if you sell and then buy the same stock back again in a short time (weeks or months)?. I sold a stock, regretted selling it and want to buy it back. (I know, I need more discipline and patience).
It's a tax-advantaged account--no taxes on anything inside. On the downside, no loss-deduction either.

What it sounds like you're concerned about is a wash sale, which is only a problem (a) in taxable accounts and (b) when you've sold a stock at a loss and bought "substantially identical shares" within 30 days. Even in taxable accounts, you're allowed to do that, you just can't deduct the loss or use it to offset a gain (you do get the consolation of subtracting some or all of the loss from the cost basis of your new shares--yay for frustrating accounting). If you've made a gain in the stocks, the wash sale rule doesn't apply--you're taxed on the gain and are free to buy whatever you want with the money, including the same shares (the IRS doesn't care--that's just giving them money).
dbr
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Re: Buying and selling stock in a Roth account.

Post by dbr »

zblongladder wrote:
IndigoE wrote:Is it true that there are no tax liabilities within a Roth account when one sells a stock? In other words are there short term capital gains or penalties if you sell and then buy the same stock back again in a short time (weeks or months)?. I sold a stock, regretted selling it and want to buy it back. (I know, I need more discipline and patience).
It's a tax-advantaged account--no taxes on anything inside. On the downside, no loss-deduction either.

What it sounds like you're concerned about is a wash sale, which is only a problem (a) in taxable accounts and (b) when you've sold a stock at a loss and bought "substantially identical shares" within 30 days. Even in taxable accounts, you're allowed to do that, you just can't deduct the loss or use it to offset a gain (you do get the consolation of subtracting some or all of the loss from the cost basis of your new shares--yay for frustrating accounting). If you've made a gain in the stocks, the wash sale rule doesn't apply--you're taxed on the gain and are free to buy whatever you want with the money, including the same shares (the IRS doesn't care--that's just giving them money).
The issue I was referring to is selling for a loss in taxable and purchasing again in tax deferred within the wash sale criterion. The problem in that case is that the wash is disallowed, but the basis is NOT recovered. I am assuming that particular penalty applies in a Roth as well.

I agree this is reaching to find a possible situation for the OP.

I have no comment re "How would the IRS know?"
the intruder
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Re: Buying and selling stock in a Roth account.

Post by the intruder »

Tramper Al wrote:
the intruder wrote:Ask yourself the question how is the IRS ever going to find out? There is no reporting of IRA purchases to the IRS any more than the IRS knows if you took your Minimum Required Distribution at 70 1/2.
Yeah, it's really only important to adhere to the tax laws if there is a chance you'll get caught if you don't.
AL:

Its not important to most taxpayers who, unlike you, do not know that they are violating the wash sale rule and will never be discovered by the IRS.

Your problem is you know too much whereas other taxpayers who know less do not subject themselves to the restrictions that you apply to yourself without any adverse tax consequences.
david9117
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Post by david9117 »

Need to be careful. Wash rules applies across all your/spouse taxable and tax deferred accounts.

Example: If you sell a stock in taxable and buy within 30 days in Roth the same security, the wash rule applies.

How IRS is going to find that out is another question.
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