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Move stocks/mutual funds from brokerage to IRA?
Old 02-09-2024, 06:08 PM   #1
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Move stocks/mutual funds from brokerage to IRA?

Quick question. We have some mutual funds that we've been holding for quite a while in a taxable account that spin off dividends and capital gains every year. We don't need these for income right now, so in the interest of tax efficiency, we'd be better off if the MF were in an IRA. We could sell the MF in the taxable account and then re-buy it in the IRA, but then we'd be on the hook for tax on about $100k of LTCG. Is there any way to swap securities from a taxable brokerage account into an IRA without having to sell first...for example using a 60-day rollover? Or does it always have to be cash going into and out of an IRA? If it matters, this is at Schwab.
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Old 02-09-2024, 06:23 PM   #2
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Originally Posted by scrinch View Post
Quick question. We have some mutual funds that we've been holding for quite a while in a taxable account that spin off dividends and capital gains every year. We don't need these for income right now, so in the interest of tax efficiency, we'd be better off if the MF were in an IRA. We could sell the MF in the taxable account and then re-buy it in the IRA, but then we'd be on the hook for tax on about $100k of LTCG. Is there any way to swap securities from a taxable brokerage account into an IRA without having to sell first...for example using a 60-day rollover? Or does it always have to be cash going into and out of an IRA? If it matters, this is at Schwab.
You cannot move anything into an IRA unless it complies with annual contribution limits that you are entitled to. Primarily, you must have earned income to contribute new funds to an IRA. Are you earning wage income still?

There is no swapping.
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Old 02-09-2024, 06:25 PM   #3
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Contributions to IRAs must be in cash (or cash equivalents, like a check). This is probably mentioned somewhere in IRS Pub 590-A.

Distributions from IRAs can be in cash or can be in-kind.

(Edited to change reference from 590-B to 590-A.)
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Old 02-09-2024, 06:44 PM   #4
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Okay thanks. So returning funds from a 60-day rollover would be governed by the same cash rules as a new contribution?
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Old 02-09-2024, 07:08 PM   #5
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IRS Pub 590-A says that...
"Contributions must be in the form of money (cash, check, or money order). Property canít be contributed. Although property canít be contributed, your IRA may invest in certain property. For example, your IRA may purchase shares of stock."
So property (like stock or a mutual fund) cannot be contributed. Thanks for pointing me in the right direction.
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Old 02-09-2024, 08:34 PM   #6
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Okay thanks. So returning funds from a 60-day rollover would be governed by the same cash rules as a new contribution?
Not 100% sure but that would make sense to me. Contributing an asset is problematic because it's value could fluctuate during the rollover process. Also, there would need to be rules for how to handle any capital gains or losses of the asset before it went into the IRA. I think those are two of the reasons why it's only cash (check/MO/etc.).
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Old 02-10-2024, 06:49 AM   #7
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Okay thanks. So returning funds from a 60-day rollover would be governed by the same cash rules as a new contribution?
essentially, yes. If one could avoid capital gains tax on unrealized gains by moving assets into an IRA it would be a widespread activity that we would all know all about. There are no undiscovered tax gimics to be had. Thousands of tax experts scour the code annually to find them so your chances of discovering one are extremely low.
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Old 02-10-2024, 07:05 AM   #8
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How about moving mutual funds to ETFs ? Can that be done?
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Old 02-10-2024, 07:14 AM   #9
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How about moving mutual funds to ETFs ? Can that be done?
Vanguard has quite a few mutual funds that have a corresponding ETF equivalent. This is a special situation that they provide by the unique way their funds are set up. They allow you to convert from the mutual fund to the corresponding ETF without it being a taxable event. I'm not aware of any other mutual fund company that provides that capability. And Vanguard does not provide it for all mutual funds.

But, in general, you cannot simply "move" a mutual fund to an ETF. You would need to sell the mutual fund and then buy the ETF. This could be a taxable event for you. This also doesn't accomplish anything that allows you to move from a taxable account into an IRA, which was the OP's original question.
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Old 02-10-2024, 07:19 AM   #10
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when i pulled my money from vanguard i had the admiral shares of an s&p fund

fidelity said they canít handle admiral shares so i converted to voo and then transferred to fidelity
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Old 02-10-2024, 10:12 AM   #11
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Well if you are talking about a contribution to a traditional IRA, you would be converting capital gains taxed at a favorable rate into ordinary income. I sure would not do that.
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Old 02-10-2024, 10:17 AM   #12
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Well if you are talking about a contribution to a traditional IRA, you would be converting capital gains taxed at a favorable rate into ordinary income. I sure would not do that.
I think OP was hoping that moving the assets with unrealized gains into the IRA could sidestep the capital gains taxation on those gains. As already discussed, they cannot do so.
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Old 02-10-2024, 10:18 AM   #13
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What we did for tax efficiency is to sell various funds and buy ETF's .
We did this over years, as all at once would have been foolish tax-wise..
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Old 02-10-2024, 10:23 AM   #14
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when we got ready for retirement i was so glad we used mutual funds and not etfs all those decades if they existed.

the pent up taxes in the etfs would have been a tax torpedo, the fact they were funds had the taxes paid over the decades .

the year we made the changes was 2007 from 100% equities.

we made all our changes in one year .

had it been etfs we would have been caught in 2008.

the tax efficiency of etfs is great , until it’s not
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Old 02-10-2024, 10:31 AM   #15
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How about moving mutual funds to ETFs ? Can that be done?
I did that that with Vanguard ust before moving back to England because the ETFs "report into" HMRC so receive the lower tax treatment for dividends and capital gains. No tax consequences at all.

I believe it can only be done with funds that are 100% stocks or bonds and have an ETF equivalent.
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