Any financial smarties here?

[NerdCore]

So, back about 10 years ago, my mom decided to open up a mutual fund for myself and my sister. She put $2,500 into each with John Hancock in their TAGRX fund. Now, about three years ago she passed away and I am 25 (over the 18 required to manage it myself) Today I called John Hancock to have them put the mutual fund into my name only without my mom as a custodian. I have to jump through these annoying hoops and fill out a W9. Anyways, the Mutual Fund has increased to about $3,800 and I am looking to take it out of the mutual fund and trade stocks myself. It's something I have researched for a while but I have a question. Since my fund has grown over the original $2,500 if I take it out I would need to pay Capital Gains Tax...15%....which I don't want to do. Is there a way to avert that so I can take all of it and move it from Mutual Funds into my own personal stock portfolio without paying the cap gain tax?

[da3bous]

So, back about 10 years ago, my mom decided to open up a mutual fund for myself and my sister. She put $2,500 into each with John Hancock in their TAGRX fund. Now, about three years ago she passed away and I am 25 (over the 18 required to manage it myself) Today I called John Hancock to have them put the mutual fund into my name only without my mom as a custodian. I have to jump through these annoying hoops and fill out a W9. Anyways, the Mutual Fund has increased to about $3,800 and I am looking to take it out of the mutual fund and trade stocks myself. It's something I have researched for a while but I have a question. Since my fund has grown over the original $2,500 if I take it out I would need to pay Capital Gains Tax...15%....which I don't want to do. Is there a way to avert that so I can take all of it and move it from Mutual Funds into my own personal stock portfolio without paying the cap gain tax?

Is the fund in a roth IRA? If so those are tax shelters and you won't have to pay capital gain tax. The only other instance were you wont have to pay capital gain that i can think of is to figure out a way to keep the gains on paper. If you can sell a stock and purchase another without physically touching the money (unrealized capital gains), there has not yet been an actual gain, only on paper. But this is just deferring your taxes and you will have to pay them later. I'd talk to a real broker to get this clarified.

BTW; To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

[NerdCore]

Yea looks like I am SOL on this one. It's not an IRA. It's a Large Cap Equity A Mutual Fund.

[cardoza]

Yea looks like I am SOL on this one. It's not an IRA. It's a Large Cap Equity A Mutual Fund.

I'm studying to take my CPA exam soon so from a tax perspective I have a decent understanding. Since the fund is not tax exempt, the only real way you have to avoid the capital gain tax is to offset it with some form of capital loss. If you have any capital assets that you've been holding on to that you don't particularly care about that would end up selling for an amount that is less than their basis (most likely the price you purchased the asset), then you could potentially offset the $1300 capital gain. Or wait to transfer the stock until a period when you will have recognized some capital loss through normal transactions, and then you could hopefully transfer the money without paying the 15% tax. If you want some more info feel free to shoot me a PM.

[aar0n.]

Is the fund in a roth IRA? If so those are tax shelters and you won't have to pay capital gain tax. The only other instance were you wont have to pay capital gain that i can think of is to figure out a way to keep the gains on paper. If you can sell a stock and purchase another without physically touching the money (unrealized capital gains), there has not yet been an actual gain, only on paper. But this is just deferring your taxes and you will have to pay them later. I'd talk to a real broker to get this clarified.

BTW; To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Damn you definitely know your stuff from the sound of it. Are you a tax/finance professional?

[da3bous]

Damn you definitely know your stuff from the sound of it. Are you a tax/finance professional?

lol nope, i just am very hands on with everything i do, so when i do it, i do it right. Just been casually investing and trading for the past 14 years or so.

[aar0n.]

lol nope, i just am very hands on with everything i do, so when i do it, i do it right. Just been casually investing and trading for the past 14 years or so.

Haha gotcha. That's definitely a good way to go about it and it sounds like you did pretty well with it, that's quite a car collection

[GotALMS]

Is the fund in a roth IRA? If so those are tax shelters and you won't have to pay capital gain tax. The only other instance were you wont have to pay capital gain that i can think of is to figure out a way to keep the gains on paper. If you can sell a stock and purchase another without physically touching the money (unrealized capital gains), there has not yet been an actual gain, only on paper. But this is just deferring your taxes and you will have to pay them later. I'd talk to a real broker to get this clarified.

BTW; To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Sorry, but this complete false information. Unrealized Gains/Loss have nothing to do with if you actually "touch the money" or if the gains are "only on paper". Unrealized Gains/Losses occur when an investment changes value while you are holding it. For example, you purchase 100 shares of Company X stock for $1. If Company X stock increases to $5/share, the value of the shares increased from $100 to $500, and you would have an unrealized gain of $400. The second you sell Company X stock, the $400 unrealized gain becomes a realized gain, and you'll owe the taxes on it.

Also, money invested in any form of IRA, Traditional or ROTH, has restrictions and doesn't work like a normal savings account. Basically, with IRA's (individual retirement accounts) you're going to pay tax on the money, weather it's when you earn it (ROTH IRA, but no taxes are paid when it's withdrawn) or when it's withdrawn from the account (traditional IRA, no taxes are paid for interest, dividends, etc. while money is in the account). There are some tax benefits for investing in an IRA, but one of them is not avoiding the payment of capital gains tax.

[da3bous]

Sorry, but this complete false information. Unrealized Gains/Loss have nothing to do with if you actually "touch the money" or if the gains are "only on paper". Unrealized Gains/Losses occur when an investment changes value while you are holding it. For example, you purchase 100 shares of Company X stock for $1. If Company X stock increases to $5/share, the value of the shares increased from $100 to $500, and you would have an unrealized gain of $400. The second you sell Company X stock, the $400 unrealized gain becomes a realized gain, and you'll owe the taxes on it..

Yes but there is/was a loop hole that some people have used that if that while transferring funds to a different portfolio but owned by the same person you can get away with it for the time being (separate from being able to use a 1031 exchange form for when you sell property). There used to be a lot more incentives into reinvesting but yes you cant avoid capital gain tax, at some point you end up paying it (well you could avoid it but you'd get busted at some point).

Mutual Funds are also inherently alot more difficult to deal with tax wise also because its a basket of various stocks and figuring out cost basis on each one and then if it paid out dividends and how those dividends were used. Why i told him to talk to a broker who might know the current tax laws and advice him accordingly.

Also, money invested in any form of IRA, Traditional or ROTH, has restrictions and doesn't work like a normal savings account. Basically, with IRA's (individual retirement accounts) you're going to pay tax on the money, weather it's when you earn it (ROTH IRA, but no taxes are paid when it's withdrawn) or when it's withdrawn from the account (traditional IRA, no taxes are paid for interest, dividends, etc. while money is in the account). There are some tax benefits for investing in an IRA, but one of them is not avoiding the payment of capital gains tax.

If you Reinvest the capital gains that have accrued tax-free in your IRA or 401k plan (which qualify as pension plans), by rolling over the funds into another qualifying account within 60 days after closing or liquidating the initial account you don't pay capital gains till you liquidate that account.


The OP is not asking to avoid Capital Gain tax completely but he is trying to avoid paying it while he transfers his Mutual funnd to another portfolio, basically just deferring it for the time being.

Another alternative for the OP is that if he has any loss in his portfolio (any stocks that are valued less than his cost basis) he can sell those stocks and use them as a tax write off. But my understanding is there is a cap on how much loss you can actually claim.