Have a Tax Question? Ask a Tax Expert
Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
How are you today?
Once you transfer the funds from the IRA to the brokerage, it becomes ordinary income the year of the transfer.
After that, if the assets appreciate in value and you sell them, you will have capital gain
You will have to recognize capital gains taxes on those transactions.
You will have income on interest and dividends you receive as well.
So, unfortunately, the answer is "yes" the IRS will want a cut of the capital gains you receive on assets that you sell.
I'm sorry I didn't have better news for you.
Is the 38 1/2 % tax hit still a good number?
It depends on your income level and how much you are taking out.
Lets say my income level is $175,000.00 and I am withdrawing my entire IRA for transfer to a regular brokerage account and the value is say one million.
Yes, the figure would be correct. Your tax would be about 39% on 1 million
What if I transfer the entire one million in cash, so they take 390,000.00 how do they tax the balance if I hold the cash outside of the banking system?
If you hold the cash, you only have to pay tax on any income generated by that cash - so if you had interest, you would be taxed on that.
But if you bought stock for $500,000 and sold it for $525,000 you would owe tax on $25,000
Thank you Megan, I think you have answered all my questions.
You're welcome. Glad I could help.
If you would, please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today