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Making switches from tax deferred to taxable accounts


matjone
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I am not familiar with how brokerages operate and I thought maybe someone here could help me.  Say I have a non dividend paying stock like berkshire in a tax deferred account like a roth ira, and some cash in a taxable account.  I've also got some dividend paying stock that I'm thinking about buying, so I figure I'll sell berkshire in my roth, buy it in the taxable account, and use the cash from the sale to buy the dividend payer in the roth.  Is there a way to do this and ensure that the trade goes through, and I don't lose any money other than the commissions?

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Buying and selling within a ROTH won't trigger any tax.

 

Selling in your taxable account could trigger a taxable act if there is a gain (or loss) on the position. But simply buying BRK in this account won't create any taxes due.

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Not directly answering this, but I have attempted in the past to sell an illiquid stock in my Roth to my taxable account, it didn't work out unfortunately.  I tried to put in an odd sell order, then put in a matching buy order.  I expected a crossing transaction between accounts, but nothing triggered.  What happened was my sell went through and then about a day later my purchase when through, not exactly what I was expecting.

 

 

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I am not familiar with how brokerages operate and I thought maybe someone here could help me.  Say I have a non dividend paying stock like berkshire in a tax deferred account like a roth ira, and some cash in a taxable account.  I've also got some dividend paying stock that I'm thinking about buying, so I figure I'll sell berkshire in my roth, buy it in the taxable account, and use the cash from the sale to buy the dividend payer in the roth.  Is there a way to do this and ensure that the trade goes through, and I don't lose any money other than the commissions?

 

What do you mean ensure the trade will go through? If you use limit orders and sell at the bid and buy at the ask it should go through, unless the bid and/or ask change in the time it takes you to submit your order. You could use a market order and it should go through near the bid for the buy and the ask for the sell. Besides commissions, you will lose the spread between the buy and ask for BRK, which should be no more than 2 to 4 cents per share. Of course there might be a slight change in the bid and ask in the time it takes you to switch between accounts and submit the trades.

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Not directly answering this, but I have attempted in the past to sell an illiquid stock in my Roth to my taxable account, it didn't work out unfortunately.  I tried to put in an odd sell order, then put in a matching buy order.  I expected a crossing transaction between accounts, but nothing triggered.  What happened was my sell went through and then about a day later my purchase when through, not exactly what I was expecting.

 

I remember reading that self-dealing is illegal.  Do I have it wrong?  I believe the spirit of the law is to keep people from manipulating the share price.

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Not directly answering this, but I have attempted in the past to sell an illiquid stock in my Roth to my taxable account, it didn't work out unfortunately.  I tried to put in an odd sell order, then put in a matching buy order.  I expected a crossing transaction between accounts, but nothing triggered.  What happened was my sell went through and then about a day later my purchase when through, not exactly what I was expecting.

 

I remember reading that self-dealing is illegal.  Do I have it wrong?  I believe the spirit of the law is to keep people from manipulating the share price.

 

Isn't self-dealing when someone in a position of power takes advantage of that position over shareholders?  Based on the definition I've found online there is nothing wrong with a retail shareholder placing a buy order in one account and a sell in a different account.  It's up to the brokerage to fill the buy with the same person's sell.  So no, this doesn't appear illegal.

 

Here's what Webster says about it:

 

Definition of SELF-DEALING

 

: financial dealing that is not at arm's length; especially : borrowing from or lending to a company by a controlling individual primarily to the individual's own advantage

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Thanks, I just saw the replies to this. I spoke to IB and they said it is illegal to sell shares to yourself.  So everyone can rest easy now knowing they have rules in place to keep whales like me from manipulating 300 B market cap stocks.  I figure even if the rule is good for nothing else I got a good laugh out of it in this instance.

 

You are right boilermaker, I could have done what you said and it wouldn't have made a lot of difference in this case, but you are going to lose the spread between the bid & ask which can be big in some cases.  I can see other ways you could get screwed.  Say for example you've got a sell order for stock A at .99 and a buy at 1.00.  Sell order goes through but for some reason the buy doesn't, then the company announces they've beat estimates or something, stock goes up 20%, and you are stuck.  If you use market orders you could also end up in trouble if there is another flash crash.

 

What ended up happening in this case was I sold and then bought back a tad cheaper, so it worked out in my favor.

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