transfers and taxes


T

Thompson Frank

To simplify record keeping I want to move a few mutual funds from one of my brokers to another one of my brokers. Will that action be treated as selling & buying & therefore taxed?
 
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J

JoeTaxpayer

To simplify record keeping I want to move a few mutual funds from one of my brokers to another one of my brokers. Will that action be treated as selling & buying & therefore taxed?
Be sure the transfer occurs "in-kind." That is, the shares of funds move
as shares and are no liquidated for any reason. So long as the move is
done correctly, no issue, no sale or IRS notification.
 
T

Tad Borek

To simplify record keeping I want to move a few mutual funds from one
of my brokers to another one of my brokers. Will that action be
treated as selling & buying & therefore taxed?
One suggestion - before you transfer the funds out, download a complete
history of each holding so you know the cost basis of the shares you
still own. That won't necessarily transfer over, and can be harder to
obtain once you leave a brokerage firm.

-Tad
 
D

David S Meyers CFP

One suggestion - before you transfer the funds out, download a complete
history of each holding so you know the cost basis of the shares you
still own. That won't necessarily transfer over, and can be harder to
obtain once you leave a brokerage firm.
Tad, that's a great followup. (And, as JT indicated, make sure to tell
the custodians to transfer "in kind").

Note a few minor details about this:

1. The custodian is supposed to be keeping track of basis as of the
last couple of years, but any positions (or partial positions!) from
prior to the rule going into effect are "not covered" and they may or
may not have kept track of basis for you.

2. Any covered basis should be transmitted to the new custodian. But
it may not go through correctly and it's your responsibility to make
sure it's right.

3. Covered or not, whatever basis they report to/for you, it's still
your responsibility to make sure it's right, both in general and in
particular, when you do taxes on sales.

4. The old custodian certainly should be able to get you old statements
and/or confirmations for a while after you transfer away, but they may
also charge for digging them up or, in some cases, not even be able to
find them. Again, since it's your responsibility, it's especially good
to make sure you have the data *before* you move the shares away (as
Tad was saying).

and lastly, 5. People very frequently forget to count reinvested
distributions when they compute basis. Your basis includes not just
your original purchase, but any reinvested distributions count as
additional purchaes. Make sure you have statements which include all
such distributions. Most equitiy funds do distributions in December,
some a couple of times a year, and most bond funds distribute anywhere
from quarterly to monthly. This may mean a *lot* of transactions
needed to track down and compute your basis even if you only made a
single explicit purchase. (Let me tell you about how I just managed
basis tracking on a position a client started accumulating with
irregularly sized, sometimes monthly purchases -- in the 70s, with
reinvested distributions all along the way - ugh!)

Great question!

--David



--
David S. Meyers, CFP®
http://www.MeyersMoney.com
disclaimer: discussions in misc.invest.financial-plan are for
educational purposes only and should not be construed as financial
advice. For personal financial advice, please consult directly with a
professional.
 
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N

news

Thompson Frank said:
To simplify record keeping I want to move a few mutual funds from one of
my brokers to another one of my brokers. Will that action be treated as
selling & buying & therefore taxed?
The proper way to do this is to use an ACATS transfer form filed with the
receiving broker.

Be certain to indicate both the symbol and CUSIP number of the funds to be
transferred.

There will be no tax consequences for a proper ACATS share transfer.
 

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