Vanguard Conversion of Mutual Fund to ETF / Living in Germany

[endyii]

I am currently living in Germany, been out of the US for almost 10 years. I am about to go into my draw down phase for retirement. I feel more comfortable having ETFs sitting in Schwab (where a rollover IRA sits), then Mutual Funds in Vanguard/Schwab, with higher chance of Schwab allowing me to hold onto to ETFs as long as I do not accumulate more (purchase or reinvesting dividends). I did not know of the conversion before I moved out of the US.

I understand this is a tax free event in the US, since it looks like it is transfer internally (possibly a new share class) within Vanguard. I am looking to see if I will run afoul with taxes in Germany. My understanding is there is no gains/loss reported on 1099 (i should have done a test of a few lots before the end of last year).

Has anyone done this conversion while residing in Germany, what was the impact? Or can anyone shed some light on how it is or is not reported, or changes to ones 1099, etc?

[stan1]

It sounds like you want to convert a US Vanguard mutual fund held in a US Vanguard brokerage account to a US ETF, and then ACATS transfer the resulting US ETF from the US Vanguard account to a Schwab US account, can you confirm that is my correct understanding?

The conversion from mutual fund to ETF at Vanguard is not a taxable event and will not trigger a 1099. Your cost basis in the ETF will be updated to mirror the cost basis you had in the mutual fund.

[enad]

google AI response:

Yes, you can typically convert Vanguard mutual fund shares to Vanguard ETF shares, even if you are living outside the US, but you may need to check Vanguard's international site for specific details and restrictions

Have you contacted Vanguard yet?

[stan1]

google AI response:

Yes, you can typically convert Vanguard mutual fund shares to Vanguard ETF shares, even if you are living outside the US, but you may need to check Vanguard's international site for specific details and restrictions

Have you contacted Vanguard yet?

AI response might not be good for this situation if Vanguard thinks OP is still in US with a US address on the account and not in Germany.

[endyii]

It sounds like you want to convert a US Vanguard mutual fund held in a US Vanguard brokerage account to a US ETF, and then ACATS transfer the resulting US ETF from the US Vanguard account to a Schwab US account, can you confirm that is my correct understanding?

Yes, I am looking to convert VTSAX to VTI in my US Vanguard account, then ACATS transfer to Schwab brokerage account. I assume my combined 1099 would show dividends from VTSAX before conversion, and then dividends from VTI afterwards.

Additionally, will my lots/basis details be transferred to Schwab, or will I need to keep and manage it manually?

[stan1]

Yes, I am looking to convert VTSAX to VTI in my US Vanguard account, then ACATS transfer to Schwab brokerage account. I assume my combined 1099 would show dividends from VTSAX before conversion, and then dividends from VTI afterwards.

Yes, the annual consolidated 1099 will show dividends paid by the mutual fund and then by the ETF. It works as you'd expect it would.

Additionally, will my lots/basis details be transferred to Schwab, or will I need to keep and manage it manually?

If you have not sold shares before and are eligible to change the cost basis, set the cost basis for the mutual fund holdings to specific ID before you do the conversion. Give it a few days to settle and look again to make sure it is right. You need the cost basis to be correct before you take any more actions. It may take a few days.

If all the mutual fund shares are covered (bought 2012 or later) the cost basis should transfer to Schwab but it may not show up immediately. If some are non-covered or you have sold shares let us know what you've done and you'll get some more specific advice.

[endyii]

Additionally, will my lots/basis details be transferred to Schwab, or will I need to keep and manage it manually?

If you have not sold shares before and are eligible to change the cost basis, set the cost basis for the mutual fund holdings to specific ID before you do the conversion. Give it a few days to settle and look again to make sure it is right. You need the cost basis to be correct before you take any more actions. It may take a few days.

If all the mutual fund shares are covered (bought 2012 or later) the cost basis should transfer to Schwab but it may not show up immediately. If some are non-covered or you have sold shares let us know what you've done and you'll get some more specific advice.

Great, I have already converted to ID/lots for my cost basis. Germany does FIFO for capital gains calculations, but only at the account level based on some rulings. Having an account for selling and moving specifics lots is possible and can help optimize my cap gains to mitigate SORR at the start of retirement if needed.