Question about Transfer of Mutual Funds

Forum|Forum|6 years ago
January 25, 2020
2 replies
18 views

I have considerable funds that are currently invested in a mutual fund, but I would like to transfer them to an index fund in order to take advantage of lower fees and better performance. However, as this money has been in my mutual fund for several years, I am worried that the transfer might trigger a large capital gains tax. Is there any way for me to make the transfer without having to paying the capital gains tax (until I decide to actually sell and collect the profits)?

Critter

Level 15

Sorry but that is a sale and you pay cap gains no matter what the profits are used to purchase.

jtax

Level 10

If the mutual funds are held in an IRA or 401k or the like there will be no tax until withdrawn. Selling a fund and buying another one is not a withdrawal.

If, however, they are in a regular taxable account, then yes you will have to pay capital gains. However capital gains rates have never every been lower. Some people even have a zero percent rate! See e.g., https://www.thebalance.com/how-to-use-the-zero-percent-tax-rate-on-capital-gains-2388995

Moving to index funds is a very good idea. (IMHO)

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