Selling shares to switch funds in taxable

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HeelaMonster
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Selling shares to switch funds in taxable

Post by HeelaMonster »

I have reviewed the Wiki on this topic and understand the general principles, but have a question specific to our situation.

For many years, we used Vanguard STAR (VGSTX) as our go-to fund in both IRAs and taxable accounts. While this balanced fund-of-funds served us well (10% annual returns since the 1980s), we have since moved to lower cost, more tax-efficient index funds. However, we still have this legacy fund ($150k) sitting in our taxable account, and would be happy to transition that as well, unless the tax hit on several decades of growth argues against. We haven't added new money in many years, and have now stopped reinvesting dividends and capital gains. Vanguard provides the cost basis from 2012 to present. We have records to reconstruct the cost basis prior to 2012, but it's going to take some methodical digging (which I have done for even older, higher cost, less efficient funds... so I know it can be done, and also know the hit may be smaller than expected, having already paid tax on distributions). Once I have this full cost basis, then I can assess what the true tax hit will be.

In the meantime, my question involves the shares purchased over the past two years via reinvested distributions. These specific lots are currently showing a loss. Is there any reason to not sell those off immediately and book that loss, while I continue to dredge records for cost basis of older shares? For example, is there some reason that makes it advantageous to wait and sell off ALL shares as one aggregate set? I can't see what that would be, but have done a lot more buying than selling of fund shares, and realize I may be missing something.

[P.S., We will just be exchanging these proceeds into VTSAX, so are not worried about wash sales, etc]
mhalley
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Re: Selling shares to switch funds in taxable

Post by mhalley »

Tax loss harvesting is fine. No guarantee that the market will start going back up and eliminate the losses. Be sure to turn off dividend reinvestment.
MattB
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Re: Selling shares to switch funds in taxable

Post by MattB »

mhalley wrote: Fri Jan 21, 2022 5:55 pm Tax loss harvesting is fine. No guarantee that the market will start going back up and eliminate the losses. Be sure to turn off dividend reinvestment.
+1.
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Dale_G
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Re: Selling shares to switch funds in taxable

Post by Dale_G »

For sure sell recent lots that are at a loss.

But have you looked at the "Cost Basis" tab for the Star Fund? (My Accounts -> Balances & holdings -> then cost basis -> then show details). All of the lots prior to 2012 are lumped together under "various" with the average price and total cost shown.

You don't have to dig for the individual lot costs prior to 2012 if the tax bite is acceptable for selling the entire position.

Dale
Volatility is my friend
Topic Author
HeelaMonster
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Re: Selling shares to switch funds in taxable

Post by HeelaMonster »

Dale_G wrote: Fri Jan 21, 2022 11:06 pm For sure sell recent lots that are at a loss.

But have you looked at the "Cost Basis" tab for the Star Fund? (My Accounts -> Balances & holdings -> then cost basis -> then show details). All of the lots prior to 2012 are lumped together under "various" with the average price and total cost shown.

You don't have to dig for the individual lot costs prior to 2012 if the tax bite is acceptable for selling the entire position.

Dale
Thanks, Dale

Yes, I have been in the cost basis tab, so have line-by-line basis from 2012 to present. BUT... cost basis is completely empty for the non-covered shares, with the exception of the number of shares lumped in that category (more than half of the total). This absence of info seems to be unique to that holding because, if I look at another fund that predates 2012 (e.g,, VTIAX), there I can see average cost and total for non-covered shares... just as you describe. All holdings are set to Specific ID method, so that missing info (for one and only one) has me stumped. STAR is my oldest holding, so maybe it's just too old? Or does method need to be reset to Average Cost, in order for that to display (... I'm thinking that may be a stupid question, even as I type it!)?
Last edited by HeelaMonster on Sat Jan 22, 2022 7:34 am, edited 1 time in total.
livesoft
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Re: Selling shares to switch funds in taxable

Post by livesoft »

Don't forget that if you donate to charity, then giving older shares of your fund is a good way to do that - either directly or through a donor-advised fund.
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Dale_G
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Re: Selling shares to switch funds in taxable

Post by Dale_G »

Yes, I have been in the cost basis tab, so have line-by-line basis from 2012 to present. BUT... cost basis is completely empty for the non-covered shares
That is weird. And Average cost is not listed either? Before struggling to reconstruct the cost basis, I would "punch up" Vanguard. Assuming the shares of Star were originally purchased at Vanguard, they should be able to determine the cost basis.

I just looked at my 2011 year end report - and Vanguard showed cost basis for my ETFs, but not for any of the regular mutual funds at that time. Cost basis of all funds are included in current year end reports - and Vanguard may have started that for YE 2012. YE reports are currently available online only back to 2015, but Vanguard surely has your 2012 report archived somewhere.

I'd say, put them to work. :beer

Dale
Volatility is my friend
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