Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Tax Consequences In A Traditional IRA
Old 08-08-2022, 08:44 PM   #1
Recycles dryer sheets
 
Join Date: Oct 2021
Posts: 157
Tax Consequences In A Traditional IRA

I've searched the Internet for answers (scary right) but I want to be sure I'm crystal clear...

I have about 80 individual stocks (e.g. Apple, Microsoft, etc.) sitting in a traditional IRA... Long story but I transitioned away from my AUM Wealth Management Company and they had me invested in nearly 80 stocks.

I know in a taxable brokerage account, if I sell things higher than the cost basis I own capital gains and if it's lower then I incur capital losses. However, in a traditional IRA is there any scenario in which I would owe taxes when selling/purchasing individuals stocks or ETF's? I know I can't withdraw funds but I'm only 50 years old so I'm not going to withdraw from this account for a long time.

The Internet claims "in most cases" swapping equities/ETF's does not create taxable events in a traditional IRA but I'm not sure what are the cases that would create taxable events.
RetiredAt49 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-08-2022, 09:09 PM   #2
Full time employment: Posting here.
 
Join Date: Jul 2014
Posts: 565
If you create a wash sale by buying and selling the same stock at about the same time inside and outside the IRA, that can have a tax effect.

See Can IRA Transactions Trigger the Wash-Sale Rule? for more.

Otherwise what happens inside the IRA stays inside the IRA and won't affect your taxes.
SevenUp is offline   Reply With Quote
Old 08-08-2022, 09:22 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Posts: 5,296
You can be taxed for UBTI activity in an IRA.
COcheesehead is offline   Reply With Quote
Old 08-09-2022, 04:47 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 10,773
OP - if all you are doing is reworking your holdings in the IRA (e.g., buying alternate stocks, bonds, or index funds) you have no problem. Wash sale trickery (e.g. selling for a loss in a taxable account while buying the same in an IRA is the primary no no. Not likely to get caught, although I think the new Inflation Reduction Act funds a bunch of additional IRS agents so watch out.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 08-09-2022, 05:38 AM   #5
Full time employment: Posting here.
latexman's Avatar
 
Join Date: Mar 2014
Location: Apex
Posts: 855
Quote:
Originally Posted by COcheesehead View Post
You can be taxed for UBTI activity in an IRA.
UBTI?
__________________
Good Luck,
Latexman
latexman is online now   Reply With Quote
Old 08-09-2022, 06:13 AM   #6
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 15,965
Quote:
Originally Posted by latexman View Post
UBTI?
Partnership income outside of normal business called Unrelated Businesses Tax Income. Usually with a MLP (multi-level partnership). Over $1000 of UBTI is the trigger for paying taxes in an IRA.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson
aja8888 is offline   Reply With Quote
Old 08-09-2022, 06:31 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Posts: 5,296
Quote:
Originally Posted by latexman View Post
UBTI?
I never heard of it either, but someone on the Fidelity forum complained that Fido took taxes out of their IRA and was moaning about it only to discover they had invested in something that threw off UBTI. Weird, but it is a way to get taxed on a deferred account.
COcheesehead is offline   Reply With Quote
Old 08-09-2022, 06:32 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,246
OP, if your holdings are publicly traded stocks like Apple, Microsoft, etc you don't need to worry about UBTI.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-09-2022, 06:34 AM   #9
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 15,965
Quote:
Originally Posted by COcheesehead View Post
I never heard of it either, but someone on the Fidelity forum complained that Fido took taxes out of their IRA and was moaning about it only to discover they had invested in something that threw off UBTI. Weird, but it is a way to get taxed on a deferred account.
It's not weird if you hold partnerships (units) in an IRA. I have one, Enterprise Partners (EPD), a pipeline company. I don't have enough units to trigger UBTI tax though.

Rather than a 1099, they give you a K-1 for tax reporting.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson
aja8888 is offline   Reply With Quote
Old 08-09-2022, 06:38 AM   #10
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 15,965
Quote:
Originally Posted by pb4uski View Post
OP, if your holdings are publicly traded stocks like Apple, Microsoft, etc you don't need to worry about UBTI.
Remember that partnerships where UBTI is an issue are also publicly traded.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson
aja8888 is offline   Reply With Quote
Old 08-09-2022, 08:40 AM   #11
Thinks s/he gets paid by the post
 
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 3,251
UBTI in a tax deferred account is generally monitored by the IRA's trustee. I get notices all the time from Fidelity, but the income has never gone above $1000. If it would, the trustee (in my case, Fido) would take it from my tax deferred account, and pay the tax.
__________________
Give me Liberty or give me Death. Patrick Henry
Winemaker is offline   Reply With Quote
Old 08-09-2022, 10:02 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,246
If UBTI was an issue it would also be known to him as an issue for his current 80+ holdings from his former AUM manager.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-09-2022, 10:40 AM   #13
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 15,965
Quote:
Originally Posted by Winemaker View Post
UBTI in a tax deferred account is generally monitored by the IRA's trustee. I get notices all the time from Fidelity, but the income has never gone above $1000. If it would, the trustee (in my case, Fido) would take it from my tax deferred account, and pay the tax.
Same here, but it's Schwab that handles the Form 940 if taxes are to be paid. But in two decades of MLP's in my IRA, not once did any of my partnerships meet the $1000 UBTI threshold.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson
aja8888 is offline   Reply With Quote
Old 08-10-2022, 11:13 AM   #14
Thinks s/he gets paid by the post
corn18's Avatar
 
Join Date: Aug 2015
Posts: 1,883
OP, just watch out for wash sales with stocks held in a taxable account.

One thing to consider: minimizing growth in a tax deferred account. I was tickled pink watching my 401k grow like crazy until I got close to retirement and started looking at taxes. I held bonds in my taxable and Roth accounts as well as my 401k. I got a clue and re-wickered where I held what assets:

401k: maximum fixed income (currently 100% fixed income) to minimize growth and future taxes when I withdraw or convert to Roth

Roth: 100% equities. Maximize growth here because it will never be taxed

Taxable: 100% equities right now to make my 60/40 work out. Maximize growth here over 401k because it will be taxed @ LTCG rates vs. the 401k which will be taxed as ordinary income. This works out great for me because my LTCG rate is 0% and my ordinary income rate is 12%.

Just something to consider.
__________________
Consistently sets low goals and fails to achieve them.
corn18 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
401k's, IRA's and RMD's - tax consequences Ronstar FIRE and Money 116 11-20-2014 02:32 PM
Traditional after-tax IRA -> Roth IRA conversion easy? wanaberetiree FIRE and Money 3 09-16-2013 08:10 AM
Mailing address in Oregon - state tax consequences ItDontMeanAThing FIRE and Money 10 10-13-2008 03:15 PM
FIRECalc and the 4% withdraws - Tax Consequences Shabber FIRE and Money 9 07-15-2006 10:35 AM
Consequences of high tax locations... Rich Life after FIRE 5 01-16-2006 11:43 AM

» Quick Links

 
All times are GMT -6. The time now is 09:45 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.