Author Topic: Selling one fund to buy another... any tax-saving tips?  (Read 2360 times)

FIence!

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Selling one fund to buy another... any tax-saving tips?
« on: January 07, 2014, 01:06:35 PM »
Husband has 10k in a Janus Venture fund. We decided due to higher fees (relative to Vanguard) and general unhappiness with their customer service that we wanted to sell that and move the money into VTSMX. When the fund began, he was a minor and he had a custodian listed and had to have the fund transferred in order to cash it out. This involved going to get a "medallion signature" from a bank, sending in documentation that he is now an adult, etc. He sent all the documentation in October. In December he called and asked Janus what was taking so long, and they gave a vague answer about things being busy at year end and it should happen soon (remember what I said about customer service).

We really wanted to sell the fund last year, since we were firmly in the 15% bracket, so we could avoid capital gains. This year, even after 401k deductions, we will definitely be far into the 25% category and will pay capital gains. Guess when the change finally went through? Yep, January 2nd.

Since one of the big reasons we wanted to move the account was to avoid fees, paying capital gains is not a great situation, but we really want to move it. Is there some trick I am overlooking? Or should we just sell it and mitigate the blow by putting an equal amount in traditional IRAs this year or something? I wish there was a rollover for funds...

seattlecyclone

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Re: Selling one fund to buy another... any tax-saving tips?
« Reply #1 on: January 07, 2014, 01:21:51 PM »
It should be possible to directly transfer the shares to another brokerage. There would be no immediate tax implications from doing this, and you would be dealing with the new place's customer service from now on. Both good things, but the downside would be that your money would still be invested in this high-fee fund.

To get out of the fund entirely, there's really no way around selling to trigger a capital gains event. However, we're not talking about a massive amount of money here. Even if the value of the fund has doubled since he bought it, we're talking about a total gain of $5k from selling, which equates to a $750 tax hit.

aj_yooper

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Re: Selling one fund to buy another... any tax-saving tips?
« Reply #2 on: January 07, 2014, 04:28:21 PM »
Here's a thought:  Once the money arrives at Vanguard, sell the Janus fund.  Then take the $10k-taxes and put it in traditional IRAs.  You will have more deductions than capital gains and you will be good. 


FIence!

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Re: Selling one fund to buy another... any tax-saving tips?
« Reply #3 on: January 08, 2014, 07:00:50 AM »
Thanks for the replies. I used the FINRA fund analyzer and found that there would be nearly $800 more in fees over 10 years keeping just this amount of money with Janus instead of Vanguard, so at least after 10 years the cap gains would be a wash... and yes, by putting some of that money in a traditional IRA the tax problem is pretty much wiped out.

Chris

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Re: Selling one fund to buy another... any tax-saving tips?
« Reply #4 on: January 09, 2014, 01:10:38 PM »
Another option is to donate the fund shares directly to charity. That way you avoid paying the capital gains altogether, AND you get to take a tax deduction for the full amount (if you itemize).
Naturally, this is only a net gain for your 'stache if you were planning to make a charitable contribution in 2014 anyway.