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There is a family account with an irrevocable trust. Approx half of it is held in stocks. There is concern that the risk level is too high with the owner's age. If he converts the stocks there is a gain of approx 100k. The account manager says it will reduce the principal due to capital gains. My question is, does the capital gain get paid when the sale is transacted or when the money is actually taken out of the account? Also, is there a tax benefit in delaying the sale of the stock?
The capital gain would be taxable in the tax year that the sales occur.
Other than deferring the capital gains tax by not selling the securities, if it is actually an Irrevocable Trust (in that the grantor has no control over the Trust), then there is no other benefit to delaying the sale. The investment risk always should trump the tax issues.
ok thank you.
Remember, that it's the trust that pays the capital gains tax unless there is a distribution permitted by the terms of the trust.
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