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Assign a cost basis to stocks that are added to an account?

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atheist
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So, I move 1000 sh of Tesla stock from my IRA to my taxable account. The cost basis for those shares is the market price on the day they are moved, not the price paid when bought in the IRA. A few months later I sell those 1000 shares. KMM does not give me a capital gain for that because I don't see how to assign a cost basis when they are "added" to the taxable account. Help!
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watchstar
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First, what type of IRA do you have Roth or traditional? With a traditional IRA moving money out of it to a regular (taxable) brokerage account will be a taxable (income) event. With a Roth IRA it can be transferred out as a non-taxable event provided certain conditions are met. Since this is very complicated and I am not an expert, you will need to do your own research how Roth and traditional IRAs work.

Second, the way I have handled the transfer out of a traditional IRA to a regular (taxable) brokerage account with KMyMoney is to have a pseudo sale from the traditional IRA. I then recorded a pseudo purchase of that very same stock in my regular (taxable) brokerage account where the money used to "buy" the stock is recorded as taxable income.

Third, KMyMoney does not handle "cost basis" very well. So I have by-passed trying to record capital gains or capital losses. Instead, I use my brokerage firm's 1099 composite form at the end of the year. Part of the reason for not being concerned over KMyMoney's treatment of "cost basis" is that I use TurboTax for tax filings and I get the data off the brokerage firm's 1099 composite form. Another alternative approach, yea olde spreadsheet.

Again, you will need to do your own research to determine whether your transfers out of an IRA potentially constitute a taxable event. These transfers could also trigger penalty fees too.
atheist
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Thank you very much for the reply.
I moved stock out of the (traditional) IRA and into the taxable account. You are correct this is a taxable event. And it can involve a penalty except in certain cases which my case fits. Good idea to do the pseudo-sale/buy. I will do that.
I too use the 1099 from the brokerage firms (in April), but it is nice to have an estimate done in December to help with pre-Dec31 tax planning.
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P.S. One tip, if you ever do want to take funds out of your IRA, consider instead moving out a stock that has seen its price lowered, but one you think should come back. Inside your IRA that growth will eventually be taxed as regular income, when you withdraw the funds. But outside, that growth will be taxed at the capital gains rate of only 15%.


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