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Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 11:10 am
by RoboFan
I have both an IRA and a brokerage account. I’m happy with the combined asset allocation (~60/40 stock/bond) and the performance of the individual funds. I have two questions.

1. Can I sell the equity portion in the IRA and buy bonds and then sell an equivalent amount of bonds in the brokerage account and buy the same equities without paying taxes?

2. Can I buy new equities in the brokerage account each monrh and sell an equivent amount of the same equities fund in the IRA and buy bonds?

I see the first instance as simply “swapping” funds from one account to the other without any net change, but suspect I would end up paying taxes on any gains from the bond fund I sell in brokerage fund. In the second case I see newly invested money as as all going to buy new bonds in the IRA and the new equity funds that appear in the brokerage account as having essentially been moved from the IRA, but I’m not sure if the clock gets reset for holding them 1-year to qualify for the lower long term capital gains tax rate (or what the underlying cost basis is).

Does any the tax rules on moving funds between tax adavantaged accounts and regular brokerage accounts? Any issues I need to be aware of?

Thanks in advance.

Re: Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 11:20 am
by RickBoglehead
No, you can't do what you want, which is selling assets in a taxable account and then buying them in a tax-free account and not paying capital gains tax on the assets you sold in the taxable account.

Whether you sell equities or bonds in a taxable account, you will have to pay tax. There is no "swapping" between tax free and taxable accounts to avoid taxes.

And, when you buy assets in the taxable account, that's when the clock starts ticking on when it becomes a long term gain.

Re: Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 7:26 pm
by RoboFan
Thanks for the quick reply.

Can I still sell the the equities in the IRA and buy bonds and pay tax at “income rate” when I draw the money out?

And, can I buy new equities in the brokerage account, keep them for more than one year, and pay tax a the “long term capital gains” rate when I sell them?

My understanding is that if if I were sell something in the brokerage account at a loss (tax loss harvesting) and then buy the same fund in a tax defered account (IRA), it would be viewed as a wash and the loss would be disallows. But that’s not what I am doing. What I’m proposing to do is buy new equities in the brokerage account and start a new 1 year clock to get the long term capital gains rate and later, when I withdraw from the IRA, pay taxes as if it were income. The objective is simply to have all my equity holdings in the taxable brokerage account and all my my bonds the tax defered account.

Again, thanks for the help.

Re: Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 7:28 pm
by kelvan80
Is your IRA traditional or Roth?

Re: Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 7:39 pm
by CABob
What is your age? If you are under 59.5 you will be penaltized for any withdrawal from the IRA. You can buy and sell within the IRA without tax or penalty as long as the funds remain in the IRA.

Re: Moving equities from IRA to brokerage account

Posted: Sun Apr 15, 2018 7:48 pm
by livesoft
RoboFan wrote:
Sun Apr 15, 2018 11:10 am
1. Can I sell the equity portion in the IRA and buy bonds and then sell an equivalent amount of bonds in the brokerage account and buy the same equities without paying taxes?

2. Can I buy new equities in the brokerage account each monrh and sell an equivent amount of the same equities fund in the IRA and buy bonds?
Yes, you can probably do both of the above, but ...

... Selling bond funds in taxable next week may have a gain or loss.

a. If gain, I think gain will be small and tax could be small or even zero.

b. If loss, then no tax, BUT don't buy substantially identical bond fund in IRA for next 30 days to avoid a wash sale (which is not illegal).

Basically, you want to do a double exchange described -> https://www.bogleheads.org/wiki/Placing ... ed_account but in the reverse direction:
bonds -> equities (Account A)
equities -> bonds (Account B)

Re: Moving equities from IRA to brokerage account

Posted: Mon Apr 16, 2018 6:15 am
by RoboFan
Answers to the questions. I am under 59 12 - no much under the money could easily sit in the account for another 10 years. It’s a traditional IRA. Really, all I am trying to do is make the overall placement of funds more tax efficient. Is there ever any reason to keep equities in tax advantaged account when you have taxable bonds in a brokerage account. Everything I read tells be the bonds should be in the tax advantaged account and the equity should be in the brokerage account so as to take advantage of the lower long term capital gains rate. However, if all the money you have when start investing is going into 401k when you start investing, and you chose an asset allocation that includes bonds, and then when you get older start saving more in a regular brokerage account at the same asset allocation, you end up having bonds in the tax adavantaged account. I don’t see a way around this other than buying more stock in the brokerage account and exchanging stocks for bonds in the tax advantaged account.

Re: Moving equities from IRA to brokerage account

Posted: Mon Apr 16, 2018 8:12 am
by livesoft
I think some of the earlier responses to this thread assumed you were going to withdraw from the IRA and not simply exchange funds within the IRA.

I'd do what you are thinking if I was in your shoes. Can you estimate the gains/losses in the bond funds in taxable that you want to exchange and tell us about those gains/losses? And the estimated taxes?

Re: Moving equities from IRA to brokerage account

Posted: Mon Apr 16, 2018 10:21 am
by CABob
When you are initially investing with all money going into a tax deferred account the contributions should be allocated into your desired stock to bond ratio. Later when you have additional money to invest going into a taxable account for the most part this money should be invested in stocks only. This may cause your overall (all of your accounts) stock/bond ratio get stock heavy. I think this is the situation you are describing and trying to fix. When this happens you should do some stock and bond exchanging within the tax deferred account to get the overall allocation to where you want it. One should exchange some stock for bonds in the tax deferred account.

Re: Moving equities from IRA to brokerage account

Posted: Sat Apr 21, 2018 6:01 pm
by RoboFan
Thanks to all. I’m going to use 100% of new investment money to buy equities in the brockerage account (as CABob teccomended) while, at approximately the same time, exchange stocks worth 40% of that value for bonds in the IRA; ie for every $1000 of new equities I buy in the brockerage account exchange $400 dollars of equities for bonds in the IRA. I figure this will avoid the tax questions entirely (I am it selling anything) and, over 4 to 5 years, lead to my my IRA being comprised of 100% bonds. The end result should be same as buying at a 60/40 stock/bond ratio. I’ll still rebalancing one a year.

I am however considering going against the standard advice and increasing my %allocation to stock as I get older (standard advice being to increase the percent allocated to bonds as you get older). My sense of this is that once I have enough bonds to weather a 3-4 year downturn in the market without needing to sell a substantial amount of equities, I won’t need more bonds.