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Deciding What Account to Hold Different Asset Classes
Old 10-17-2018, 12:14 PM   #1
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Deciding What Account to Hold Different Asset Classes

I have 3 accounts, taxable, Trad IRA, and Roth from largest to smallest. I keep all the bonds I can in Trad IRA, but I also have some in taxable accounts just because that is where the money is. I have no earned income, so not adding to any account but taxable.

Some of my holdings produce income as capital gains. Timber REITs are this way. The ones I hold categorize all or almost all of their pretty generous payouts as LTCG, so I hold them only in a taxable account so I get full benefit from this.

Many other REITs categorize an amount that varies year to year as LTCG. Shopping center and many other equity REITs fit this mold. REIT payouts that do not get categorized as LTCG or other favored categories are mostly ordinary income, as they do not get the "qualified dividend" favored category that dividends from other corporations typically get.

I owned a lot of REITs in the 1990s, but lately only a few other than my timber REITs. I have now added some more, from various currently relatively cheap categories. These can be all over the map with regard to what portion of income if any is categorized as LTCG in a given tax year. I buy these in my Roth, or my taxable account. My trad IRA is all bonds and cash.

I figure in the ROTH at worst I am wasting highly favored investment space, but I will not have to pay ordinary income tax on capital gains payouts, since I pay no tax at all on payouts, or sales or withdrawals from the Roth.

I could likely rank REITs by doing a 10 year history of payout categories, and then assign them to taxable account or Roth depending on the average portion of LTCG paid by a given REIT. A lot of work, and I think no guarantee that there is much year to year similarity.

What I am looking for with this post is ideas of what other investors do with regard to this issue.

I should add that my overall debt:equity allocation is 50%.

Thanks, Ha
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Old 10-17-2018, 01:52 PM   #2
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Looks like this is not a hot topic for anyone!

I would welcome knowledge of any REITs that you know with advantaged payouts.

Going forward when I research a REIT that interests me, I'll pull their categorization of taxability of dividends over the past 5 years or so. Low work load, and I would be getting information that has a good chance of being relevant.

Ha
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Old 10-17-2018, 02:12 PM   #3
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I think you are on the right track... REITs that produce mostly LTCG in taxable and REITs that produce mostly ordinary income in tax deferred. No REITs here so I can't help much more.
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