capital gains tax

Forum|Forum|6 years ago
September 13, 2019
3 replies
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If I sell an ETF in an IRA for $100k and use the $100k to replace it with a different ETF in the same IRA, do I have to pay capital gains on the first ETF?

Anonymous_

@crelldana wrote:

If I sell an ETF in an IRA for $100k and use the $100k to replace it with a different ETF in the same IRA, do I have to pay capital gains on the first ETF?

No. Transactions (purchases/sales of securities) that are made within an IRA are not taxable.

macuser_22

No. Gains (and losses) within an IRA are not reportable - you just have more (or less) money remaining in the IRA. That is the advantage of an IRA - the money can grow tax free until you take distributions then it is taxed as ordinary income.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Anonymous

there is one possible tax hangup.

A wash sale occurs when you sell stocks for a loss, then repurchase the shares within 30 days. The IRS doesn’t allow you to take an immediate deduction on a wash-sale loss. Instead, you must wait to reap the tax deduction. Do this by adding the disallowed deduction to the cost basis of the replacement shares. This will decrease your gain or widen your loss when you eventually sell the replacement shares. Wash-sale rules apply to sales from a taxable brokerage account coupled with purchases of replacement shares in an IRA. Moreover, this causes you to lose the tax deduction completely because you can’t deduct losses that occur within an IRA.

Anonymous_

The OP distinctly wrote that he/she was replacing an ETF in an IRA with a different ETF in the same IRA, so the wash sale rule is not an issue. It would be even less of an issue if the replacement ETF did not track the same benchmark as the ETF that was sold.

macuser_22

Since wash sale rules have to do with deducting losses or lock in gains and losses or gains cannot be recognized in an IRA, wash sales rules are moot even if the same stock or ETF was sold and purchased, but I can see no reason whatsoever to sell a security in an IRA and then repurchase the same security since there can be no gain or loss to recognize - it would be a nonsense do nothing transaction.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**