I'm 61 years old. If I sell some securities in my traditional IRA and take a distribution in cash, is only the realized gain on the sale of securities taxable, or is the entire distribution taxed as income? Just wondering if the cost-basis is taken into consideration.
With one rare exception, there is no basis in securities held in a traditional IRA (TIRA). The exception involves employer shares of stock contributed to a retirement plan in past years that are withdrawn as part of something called Net Unrealized Appreciation where the basis of the stock is used in determining gain....but this is rare.Now, you may read of 'basis' in ones TIRA and not being taxed on it, but this 'basis' refers to the total of any after tax contributions that have been made to the TIRA in years past, not on the amount paid for a security. Other than this after tax 'basis', all withdrawals from a TIRA are considered ordinary income, irrespective of the source, such as interest, qualified dividends, muni bond interest, return of capital, capital gains, etc, etc, etc. Its all ordinary income when it comes out of a TIRA.BruceM
As Bruce stated differently, since you did not pay any taxes on the money placed into a traditional IRA (a deferred tax account), you pay the taxes instead on all the money you take out. Since you already paid taxes on money in a Roth IRA, you don't pay taxes on money that comes out of the Roth. Bob Menschel
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |