Hi everyone,
Looking for some advice on redeeming all shares from a fund held in a taxable account that is producing high capital gain distributions. The fund is from TIAA-CREF, symbol TIIRX, now called Nuveen Core Equity Fund A. My wife and I are 2 years into retirement and I don't like the unpredictability of the tax bill because of this fund. Last year our total income (AGI) was 171K and this included 46K from this fund's distribution.
I've never sold shares before and our accountant has retired so I'm hoping I can get some education here on this forum to avoid tax and/or timing mistakes.
Here are the rough numbers...we have $574K with a cost basis of 334K, so 240K in capital gains (broken into 224K long-term and 16K short-term). The fund's estimated capital distribution date is 12/5/24.
The questions...
Do I sell before or after the distribution? Will it matter tax-wise?
Do I do this all in one year, or spread over multiple year - tax-wise?
Do I need to sell ALL of the shares to avoid the distribution. I read that I do and question that...thinking that if I sold 1/2 of the shares before the distribution date then my distributions would be cut by 1/2 but maybe this is wrong.
I'm guessing that if I take the distribution this year then our total income would be around 170K again (includes 40-50k in cap dist). If I sell ALL 574K I want to confirm that 574K doesn't get added onto to my income of 170K and push my into a much higher tax bracket of 35%. I believe it would be just the actual 240K that gets added on to my 170K correct?
Best cost basis method for when selling only some of the shares? I've tried plugging in each of the different methods using TIAA's website program, but it shows no difference in capital gains using the various methods.
The other concern is how substantial of a tax penalty would I get for underpayment when adding 240K in capital gains say December 1st and my quarterly payments have been based on 170K annual income? Any way to avoid the penalty?
My gut and desire say to sell ALL shares prior to the distribution, with 224K long-term capital gains that I would owe 15%, so 33.6K in taxes, and 16K short-term capital gains at 24% (higher income tax bracket due to this sell), so 3.84K in taxes, + plus underpayment tax penalty.
I realize that it might be worth it to try to avoid the 16K short-term gains at 24% and divide the transaction up and wait until they become long-term and taxed at 15%, and that would save $1440.00 - But TIAA's website program suggests that it might be difficult to separate these shares out so I'm not sure it's worth the effort.
Please let me know if there are gross errors in my thinking and thank you in advance for any advice!
Looking for some advice on redeeming all shares from a fund held in a taxable account that is producing high capital gain distributions. The fund is from TIAA-CREF, symbol TIIRX, now called Nuveen Core Equity Fund A. My wife and I are 2 years into retirement and I don't like the unpredictability of the tax bill because of this fund. Last year our total income (AGI) was 171K and this included 46K from this fund's distribution.
I've never sold shares before and our accountant has retired so I'm hoping I can get some education here on this forum to avoid tax and/or timing mistakes.
Here are the rough numbers...we have $574K with a cost basis of 334K, so 240K in capital gains (broken into 224K long-term and 16K short-term). The fund's estimated capital distribution date is 12/5/24.
The questions...
Do I sell before or after the distribution? Will it matter tax-wise?
Do I do this all in one year, or spread over multiple year - tax-wise?
Do I need to sell ALL of the shares to avoid the distribution. I read that I do and question that...thinking that if I sold 1/2 of the shares before the distribution date then my distributions would be cut by 1/2 but maybe this is wrong.
I'm guessing that if I take the distribution this year then our total income would be around 170K again (includes 40-50k in cap dist). If I sell ALL 574K I want to confirm that 574K doesn't get added onto to my income of 170K and push my into a much higher tax bracket of 35%. I believe it would be just the actual 240K that gets added on to my 170K correct?
Best cost basis method for when selling only some of the shares? I've tried plugging in each of the different methods using TIAA's website program, but it shows no difference in capital gains using the various methods.
The other concern is how substantial of a tax penalty would I get for underpayment when adding 240K in capital gains say December 1st and my quarterly payments have been based on 170K annual income? Any way to avoid the penalty?
My gut and desire say to sell ALL shares prior to the distribution, with 224K long-term capital gains that I would owe 15%, so 33.6K in taxes, and 16K short-term capital gains at 24% (higher income tax bracket due to this sell), so 3.84K in taxes, + plus underpayment tax penalty.
I realize that it might be worth it to try to avoid the 16K short-term gains at 24% and divide the transaction up and wait until they become long-term and taxed at 15%, and that would save $1440.00 - But TIAA's website program suggests that it might be difficult to separate these shares out so I'm not sure it's worth the effort.
Please let me know if there are gross errors in my thinking and thank you in advance for any advice!
Statistics: Posted by finance-mess — Thu Oct 03, 2024 6:02 pm — Replies 2 — Views 145