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|Subject: Re: FF and a tax (lc) fool||Date: 8/1/1999 2:34 PM|
|Author: TchrP||Number: 12685 of 76237|
Is there a way to designate my Datek account as an "untouchable" retirement account since I won't be selling to garner income, but rather to re-invest? Is it all a wash if I reinvest anyway, save for long-term capital gains? Do I understand what I'm asking? Am I just asking the wrong questions?
You can't "designate" any existing account as an IRA. You would have to open a new account, using the correct IRA application -- not a regular account application.
Also, you can't transfer any stocks or mutual-fund shares into an IRA, unless they are already in an IRA. You make IRA contributions with cash, and then use the cash to purchase shares within the IRA, if that is what you want to do.
Now: if you have, or contemplate, various kinds of investments, it usually makes sense to use the IRA for those that (a) produce dividend income, or (b) require you to realize capital gains.
FF investments do both, so if you were investing both in FF stocks and in other stocks that didn't pay dividends and that you didn't intend to rotate annually, I'd say to buy the FF stocks in the IRA and the others in a taxable account.
Reinvestment of dividends, or of capital gains, does not defer any taxation in a regular account.
If you hold FF stocks in a regular, taxable, account, you can reduce the tax burden by holding those that have gained for a year and a day instead of exactly a year. That makes the gains long-term, and thus taxed at a lower rate than short-term gains.
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