Vanguard Exchange from one mutual fund to another

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
eager_learner
Posts: 7
Joined: Sat Jun 16, 2018 4:14 am

Vanguard Exchange from one mutual fund to another

Post by eager_learner »

Hi,

I logged into Vanguard. Clicked on Exchange to reduce my position in Fund A and increase my position in Fund B.

Do I have to pay taxes on unrealized capital gains in Fund A?

For example:
Fund A was purchased in Dec 2018 for $100
Fund A on Dec1st 2020 appreciated to $150
On Dec 1st 2020 I exchanged Fund A to Fund B.
Now on Dec 1st 2020 my position in fund B is $150

Do I need to pay taxes on the unrealized capital gain of $50 :?:

In Vanguard when I go to page for Fund A, I see three options:
1. Buy
2. Sell
3. Exchange.

I did not click on Sell or Buy.

Image

:sharebeer
User avatar
LadyGeek
Site Admin
Posts: 68779
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Vanguard Exchange from one mutual fund to another

Post by LadyGeek »

Welcome! What is the name of this account? I'm looking for something that might include "IRA" in the title.

(Don't provide personal info or the account number.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
pasadena
Posts: 1012
Joined: Sat Jul 02, 2016 1:23 am
Location: PNW

Re: Vanguard Exchange from one mutual fund to another

Post by pasadena »

If it's in a taxable account, then yes (an exchange is really selling fund A and buying fund B in one click).

If it's in an IRA, whether traditional or Roth, then no.
UpperNwGuy
Posts: 4591
Joined: Sun Oct 08, 2017 7:16 pm

Re: Vanguard Exchange from one mutual fund to another

Post by UpperNwGuy »

An exchange is actually a sell followed by a buy. If the fund is in a non-retirement account, and you sell at a profit, then the IRS wants their share even if you use the proceeds from the sale to buy another fund. In a retirement account, the IRS doesn't get involved.
KyleAAA
Posts: 8712
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Vanguard Exchange from one mutual fund to another

Post by KyleAAA »

This would be a realized gain since you sold A to buy B, so if it's in a taxable account yes, you will owe tax.
Topic Author
eager_learner
Posts: 7
Joined: Sat Jun 16, 2018 4:14 am

Re: Vanguard Exchange from one mutual fund to another

Post by eager_learner »

Thank you.
Longdog
Posts: 1532
Joined: Sun Feb 09, 2014 6:56 pm
Location: Philadelphia

Re: Vanguard Exchange from one mutual fund to another

Post by Longdog »

To expand on what KyleAAA said, an unrealized gain is an increase in NAV of a security that you have not sold. It's gone up in value, but you still hold it at that increased value. A realized gain occurs when you then sell that appreciated security. You've realized the gain and it counts toward your taxable income.
Steve
Post Reply