partial Sale of MF at profit and LT taxes

**jpg7n16** · 12-30-2011, 08:03 AM

Originally posted by cashrich View Post

Hello Friends,

I am new to tax implications when I sell some portion of my MF holding at a profit, meaning my MF position rose in value and i booked partial profits. These were Long term positions.
Question: How will the fund money that got credited to my checking account taxed?

Appreciate your help.

That depends on what type of account you held the MF in.

If it was a retirement account (IRA or 401k-type), then the full w/d is fully taxable. Just like a paycheck. If you're under 59 1/2, add a 10% penalty tax. If a Roth, well... it's complicated.

If it was a non-retirement account (regular brokerage account), then the amount of the withdraw to your bank doesn't matter at all. The only things that matter are when you bought it, what you paid for it, and what you sold it for.

Proceeds - Cost = Gain

Gain is either long term (held more than a year) or short term (less than a year). If long term, the gain is taxable at max 15%. If short term, the gain is considered normal income.

Example: Bought 200 shares @ $50/share = $10,000. Sold 75 shares @ $75/share. Withdraw all proceeds to bank.

Retirement account: 75 * $75/share = $5,625 taxable income in the year w/d occurs. (Plus possible 10% penalty)

Non-retirement account: Paid $50 each, sold at $75 each = $25 gain/share. 75 * $25/share = $1,875 gain. Taxed as either long or short term cap gains in the year the sale occurs. Withdrawal to bank account has no additional tax consequences.

**cashrich** · 12-30-2011, 09:10 AM

JPG

Thank you for the detailed explanation. In my case like the gains will be taxed at 15% as they are all LT and in taxable account. Today, I will sell equivalent or more to offset the losses in other stocks.

Thank you and have a great 2012.

partial Sale of MF at profit and LT taxes