Roll Over IRA transfer in-kind tax consequences

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poh
Posts: 3
Joined: Sat Jul 29, 2017 10:41 pm

Roll Over IRA transfer in-kind tax consequences

Post by poh » Sat Jul 29, 2017 11:13 pm

Hi everyone

I had TRRJX (TRowprice Target Retirement 2035 fund) with TRowPrice which was a 401k rolled over to Traditional IRA.

Also, I have with a Vanguard VTTHX (Target Retirement 2035 fund) which is a 401k rolled over to Traditional IRA.

Recently, I transferred in-kind TRRJX funds from TRowPrice to Vanguard.

It appears, Vanguard opened a new brokerage account to hold the TRRJX that was transferred in-kind.

Because of high exepense ratio of the TRRJX (0.74), I want to sell it and buy more of VTTHX fund which has lower expense ratio.

I inintially did a transfer in-kind from TrowPrice to Vanguard because my understanding is that "when you transfer "in kind," you simply move your investments to us "as is." There's no selling or buying involved and no tax consequences either. Vanguard receives your investments at the market value on the date of the transfer. An in-kind transfer is one of the quickest and easiest ways to move an account"

Now that I want to sell and buy more of VTTHX, I want to clearly understand the tax consequences. Could anyone please explain to me in layman's terms what they are?


The transfer is already complete so too late for this but should I have done a cash transfer instead?

Thanks advance for your feedback

retiredjg
Posts: 30326
Joined: Thu Jan 10, 2008 12:56 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by retiredjg » Sun Jul 30, 2017 8:03 am

It is unclear what your situation is.

Did you intend for the money to remain in an IRA? Is the money currently in an IRA? If not, has it been 60 days since this happened? Was anything withheld for taxes when this transfer occurred?

Do you still have copies of the form you signed to transfer the money?

livesoft
Posts: 56370
Joined: Thu Mar 01, 2007 8:00 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by livesoft » Sun Jul 30, 2017 8:17 am

If fund A is in an IRA and you sell it with the money from the sale staying in the IRA, then there are no tax consequences generally.

If money is in an IRA and you buy fund B in the IRA, then there are no tax consequences.

An IRA can be a brokerage account.

A Roth IRA can be a brokerage account.

A 401(k) can be a brokerage account.

An non-retirement account can be a brokerage account.
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poh
Posts: 3
Joined: Sat Jul 29, 2017 10:41 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by poh » Sun Aug 13, 2017 12:59 am

retiredjg wrote:
Sun Jul 30, 2017 8:03 am
It is unclear what your situation is.

Did you intend for the money to remain in an IRA? Is the money currently in an IRA? If not, has it been 60 days since this happened? Was anything withheld for taxes when this transfer occurred?

Do you still have copies of the form you signed to transfer the money?
yes. my intentions were to keep it in the IRA and nothing was withdrawn from the IRA. it has not been 60 days. it has been about 2 weeks ago.

poh
Posts: 3
Joined: Sat Jul 29, 2017 10:41 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by poh » Sun Aug 13, 2017 1:04 am

livesoft wrote:
Sun Jul 30, 2017 8:17 am
If fund A is in an IRA and you sell it with the money from the sale staying in the IRA, then there are no tax consequences generally.

If money is in an IRA and you buy fund B in the IRA, then there are no tax consequences.

An IRA can be a brokerage account.

A Roth IRA can be a brokerage account.

A 401(k) can be a brokerage account.

An non-retirement account can be a brokerage account.
Thank you for the clarification . . i intend to buy and sell within the IRA account with Vanguard so there should be no tax consequences. :sharebeer

retiredjg
Posts: 30326
Joined: Thu Jan 10, 2008 12:56 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by retiredjg » Sun Aug 13, 2017 7:46 am

If the TRPrice fund ended up in an IRA at Vanguard, you can sell or exchange it into anything you want with no tax consequences.

There was confusion over the term "brokerage" account because many people (incorrectly) use that term to refer to a taxable account, not an IRA.

clydewolf
Posts: 645
Joined: Tue Jul 21, 2015 12:51 pm

Re: Roll Over IRA transfer in-kind tax consequences

Post by clydewolf » Sun Aug 13, 2017 2:02 pm

I am currently in the process of transferring from IRA custodian A to Vanguard.
Vanguard asked if I wanted to transfer "in-kind" or cash. It was explained that when I want to change to Vanguard funds they would charge me $50 for each change. But if I transferred cash I can choose my Vanguard funds at no cost.

I think you will be paying Vanguard to sell the TRP fund beforen you can buy the Vanguard fund.

There are no tax consequences because this is all within your IRA.

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