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Capital gains and dividend distributions from taxable account
Old 12-19-2013, 08:21 AM   #1
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Capital gains and dividend distributions from taxable account

Is the general idea here to use these distributions from taxable accounts to fund a tax advantage account? I figure since you get taxed whether you reinvest or not, the smart thing to do would be to get these funds no matter how small into a tax advantaged vehicle...Maybe I answered me own question.
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Old 12-19-2013, 09:49 AM   #2
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I reinvest cap gain distributions in order to preserve the account's value. A cap gains distribution is accompanied by a drop in NAV so by reinvesting them in the same fund I end up with more shares at a lower price but the same total market value.
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Old 12-19-2013, 11:00 AM   #3
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Like scrabbler1, I re-invest the capital gains from my taxable accounts.

Since I am retired, I take money from my taxable accounts for living expenses. This withdrawal comes from the dividends because, as you pointed out, they are already taxed whether I withdraw them or not. I re-invest any excess dividends.
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Old 12-19-2013, 11:41 AM   #4
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Doesn't matter where the money comes from, if you can put more money into a tax advantaged account it is probably a good idea. Sell some shares in the taxable account and use those funds. A Roth account would be nice.
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Old 12-19-2013, 11:45 AM   #5
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Doesn't matter where the money comes from, if you can put more money into a tax advantaged account it is probably a good idea. Sell some shares in the taxable account and use those funds. A Roth account would be nice.
In some cases it does matter, for example, only *earned* income can be contributed into a traditional or Roth IRA.
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Old 12-19-2013, 02:14 PM   #6
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In some cases it does matter, for example, only *earned* income can be contributed into a traditional or Roth IRA.
I covered that, sort of, with the "if you can" hedge. I'm mainly stumped about what a tax advantaged contribution has to do with taxable dividends in the OP. Maybe you hit on part of the confusion here? Dividends aren't a substitute for earned income.
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Old 12-19-2013, 03:30 PM   #7
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+1 as to being confused by the OP.

Since I'm currently living off of my taxable accounts, I take dividends and CG distributions in cash. It just reduces what I need to later sell out of my taxable accounts to fund our living expenses and it makes my taxes less complicated.

I also do Roth conversions and pay the tax from taxable account funds, but that is a separate issue from whether I take dividends and CG distributions in cash or reinvest them.
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Old 12-19-2013, 05:39 PM   #8
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Yes, taking dividends and capital gains in cash helps when I rebalance, too. I do that during the first week of January every year. So, when I said I reinvest capital gains, I meant that I get them in cash and then reinvest them and any excess dividends (after my withdrawal) into my portfolio as a whole.
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Old 12-19-2013, 06:41 PM   #9
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In some cases it does matter, for example, only *earned* income can be contributed into a traditional or Roth IRA.
This is probably nitpicking but I think you probably mean that you can only contribute to TIRA/RIRA if you have *earned* income. A person could use his earned income (paycheck) to pay the rent, buy food , etc. and use the fund distributions e.g. to fund the IRA. Money is money after all and there is that awful word fungible that some like to use.
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Old 12-19-2013, 07:10 PM   #10
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A spouse's earned income qualifies too for IRA, though until the OP clarifies we're just guessing what details he meant.
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