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This is something I should know by now, but I don't. If I have money in a mutual fund and I want to move that money to a different mutual fund, at the same company (I am talking about Vanguard here), will I have to pay taxes on the money I moved?
If the mutual fund is held in a retirement account, then no. If it is not in a retirement account, you will owe taxes if there is a capital gain (your cost basis is less than the amount you sell it for). If it is the reverse, then you will have a capital loss to declare. If you are exchanging the fund for a like fund, you need to watch out for a "wash" sale.
If the mutual fund is held in a retirement account, then no. If it is not in a retirement account, you will owe taxes if there is a capital gain (your cost basis is less than the amount you sell it for). If it is the reverse, then you will have a capital loss to declare. If you are exchanging the fund for a like fund, you need to watch out for a "wash" sale.
what is a "wash" sale?
In this case, these mutual funds are NOT in a retirement account.
Selling one security and purchasing a substantially like security within 30 days....the loss will be disallowed. If the 2 mutual funds involved have different objectives (growth vs. income, domestic vs. international), I wouldn't worry about it.
Simplistically:
All done within the brokerage? No. Where you get a check from A and then open B? Yes
That is not true.[/quote]
Yes, that's not true at all. You are still subject to capital gains/losses if you sell one security and purchase another (modulo any wash sale considerations) regardless if you are buying/selling at the same brokerage.
Selling one security and purchasing a substantially like security within 30 days....the loss will be disallowed. If the 2 mutual funds involved have different objectives (growth vs. income, domestic vs. international), I wouldn't worry about it.
If the mutual fund is held in a retirement account, then no. If it is not in a retirement account, you will owe taxes if there is a capital gain (your cost basis is less than the amount you sell it for). If it is the reverse, then you will have a capital loss to declare. If you are exchanging the fund for a like fund, you need to watch out for a "wash" sale.
True, but let's be careful about "a like fund". Many people say that it really has got to be very similar to trigger the rule.
Quote:
Originally Posted by MrRational
Simplistically:
All done within the brokerage? No. Where you get a check from A and then open B? Yes
Regardless of whether "simplistically" or not, that's simply not anywhere close enough to be true to warrant letting it stand. It's false, as others have pointed out.
Quote:
Originally Posted by GCPA
Selling one security and purchasing a substantially like security within 30 days....the loss will be disallowed. If the 2 mutual funds involved have different objectives (growth vs. income, domestic vs. international), I wouldn't worry about it.
Even if the two funds have the same objectives, it isn't a wash sale if the holdings or the return histories, etc., are significantly different. For example: If you have an S&P 500 index fund, selling it for a managed large-cap fund is not a wash sale. These two options vary from each other sufficiently, imho, that they don't constitute a wash sale.
Quote:
Originally Posted by KittenSparkles
what does "the loss will be disallowed" mean?
Best practice is to balance capital gains (conceptually selling holdings at a "profit") with capital losses (conceptually selling other holdings at a "loss"). Rather than paying tax on the "profit" and just eating the "loss", the regulations allow you to reduce the "profit" on which you pay tax by the amount of the "loss". However, if the "loss" comes from a wash sale, you cannot use that amount of "loss" in that manner, and therefore would have to pay tax on the entire "gain".
If you have a loss (versus purchase price) on the sale of the mutual fund in question, you won't be allowed to book it and reduce your taxes.
If you don't have a loss, if you have a gain, this point does not matter.
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