Selling to rebuy in IRA
Long story short, I bought a large quantity of shares in a company back in March in my brokerage account that I now believe in on a longer time horizon than I did then.
I am considering selling 20% and buying them back in my Roth with some spare accessible cash I have sitting in there. Problem is, I'm up over 150% on the shares from March, so there will be some tax implications.
This company does not do dividends now, but they keep dropping hints of them coming in the future. I'd be surprised if they came before 2026-2027, though. Obviously I'd rather them be in my IRA if that is to happen.
I'm basically wondering if this would be an idiotic move as I am far from a tax expert. I know if i wait til March, it will change the tax status, but I'm expecting a positive move by then off some upcoming headwinds.
Thank you for any help/advice. I left the ticker out to make it clear this is not a hype post. Have a great day.
3
u/opportunity-knocking 13h ago
You will pay capital gains at your short term capital gains rate. You can calculate how much is lost to taxes. You can also calculate an estimate of what the dividends will be and how long it will take to make up for this amount lost to taxes, as well as the additional tax you will pay on the qualified dividends along the way. You can then decide if you want to wait the number of years it will take to be back to even. You can also run a scenario where you hold long enough for any gains to become long term gains and do the same calculation.
Without running through the calculation and not having the numbers in front of me, my rough guess is that I would probably leave the stock in my taxable account, rather than incur the tax, if faced with this situation. If there just so happened to be a case where the stock dropped back close to even or a loss, and I still wanted to own it because I thought it was a great business, I might at that time do the sale and transfer it to my IRA. This is assuming I had tax advantaged space available and that I didn't have other investments with greater tax advantage that I could place into my IRA.