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Need advice on selling my brokerage account to buy land

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  • Need advice on selling my brokerage account to buy land

    Hello,
    I am 5 yrs out training. My only debt is med school debt and I'm track for PSLF forgiveness in Oct '21.
    We just found land very close to our current home and we love the location.
    I would like to buy the land with money from our taxable brokerage account.

    When the market dropped in March I did some tax loss harvesting on around 40k of losses. (initial investment: 190k, dropped to 150). Now it's up to 210 so I have 60k in short term capital gains. We have a 1 year emergency fund that we wouldn't need to use to buy this land.

    My accountant is telling me it will cost around $9500 in short term capital gains taxes if I cash out and buy the land.
    If we wait until next April, the short term capital gains will become long term and I would have a smaller tax burden (and I think we would be able to donate to charity and not pay taxes on the long term gains)

    Before we found this land, I had no issues with the volatility of the market. Now that we want to use the money for something, I'm watching the market daily and stressing out if it drops again, we wouldn't be able to buy the land.

    Should I just cash out of the brokerage account now and pay the $9500 in taxes so I know I have the cash to buy the land?
    Thanks!

  • #2
    Try hard to wait for the LTCG.

    Comment


    • #3
      Is the land 200k? How long would it take to replace the Efund? Have you attempted to negotiate the price of said land yet? Have you thought about financing the land?

      Comment


      • #4
        Originally posted by JEGKTN View Post
        Hello,
        I am 5 yrs out training. My only debt is med school debt and I'm track for PSLF forgiveness in Oct '21.
        We just found land very close to our current home and we love the location.
        I would like to buy the land with money from our taxable brokerage account.

        When the market dropped in March I did some tax loss harvesting on around 40k of losses. (initial investment: 190k, dropped to 150). Now it's up to 210 so I have 60k in short term capital gains. We have a 1 year emergency fund that we wouldn't need to use to buy this land.

        My accountant is telling me it will cost around $9500 in short term capital gains taxes if I cash out and buy the land.
        If we wait until next April, the short term capital gains will become long term and I would have a smaller tax burden (and I think we would be able to donate to charity and not pay taxes on the long term gains)

        Before we found this land, I had no issues with the volatility of the market. Now that we want to use the money for something, I'm watching the market daily and stressing out if it drops again, we wouldn't be able to buy the land.

        Should I just cash out of the brokerage account now and pay the $9500 in taxes so I know I have the cash to buy the land?
        Thanks!
        great learning opportunity for planning with your money from this. something about money needed in less than certain years shouldnt be in the market.

        but i still dont see a problem since you didnt provide actual numbers....

        first, are you taking a loan to pay for this or all cash? if so, why not?
        you would use your efund since thats cash and will not generate unnecessary tax bill.
        you would sell all gains to offset losses and not generate unnecessary tax bill.
        if further money is needed then i would be saving diligently the next X# of months to meet the deficit.

        then all future savings would be redirected to replenishing efund. rinse repeat.

        Comment


        • #5
          Originally posted by Brains428 View Post
          Is the land 200k? How long would it take to replace the Efund? Have you attempted to negotiate the price of said land yet? Have you thought about financing the land?
          The developer hasn't given me a firm price yet but he is hinting at around $200k. He said he will have the price in 1 month after determining excavation costs (this is a lot in a development of 70+ lots)
          After maxing out all my tax deferred accounts, I can save about $130k/year. I currently have $75 in my emergency fund. ( so I could get my emergency fund up to 200K in one year).

          Comment


          • #6
            Originally posted by Peds View Post

            great learning opportunity for planning with your money from this. something about money needed in less than certain years shouldnt be in the market.

            but i still dont see a problem since you didnt provide actual numbers....

            first, are you taking a loan to pay for this or all cash? if so, why not?
            you would use your efund since thats cash and will not generate unnecessary tax bill.
            you would sell all gains to offset losses and not generate unnecessary tax bill.
            if further money is needed then i would be saving diligently the next X# of months to meet the deficit.

            then all future savings would be redirected to replenishing efund. rinse repeat.
            I only have $75k in my emergency fund... I suppose I could use the emergency fund and finance the rest... I'm just so sick of debt.

            Comment


            • #7
              Originally posted by Peds View Post

              great learning opportunity for planning with your money from this. something about money needed in less than certain years shouldnt be in the market.

              but i still dont see a problem since you didnt provide actual numbers....

              first, are you taking a loan to pay for this or all cash? if so, why not?
              you would use your efund since thats cash and will not generate unnecessary tax bill.
              you would sell all gains to offset losses and not generate unnecessary tax bill.
              if further money is needed then i would be saving diligently the next X# of months to meet the deficit.

              then all future savings would be redirected to replenishing efund. rinse repeat.


              Are you saying I could sell 40K in my taxable account since that's how much I have in tax loss harvesting? And this wouldn't cost me anything?

              Comment


              • #8
                Originally posted by JEGKTN View Post

                The developer hasn't given me a firm price yet but he is hinting at around $200k. He said he will have the price in 1 month after determining excavation costs (this is a lot in a development of 70+ lots)
                After maxing out all my tax deferred accounts, I can save about $130k/year. I currently have $75 in my emergency fund. ( so I could get my emergency fund up to 200K in one year).
                Finance it. Pay it off as quickly as you can if you want. Leave your taxable account alone.

                Comment


                • #9
                  Originally posted by JEGKTN View Post
                  Are you saying I could sell 40K in my taxable account since that's how much I have in tax loss harvesting? And this wouldn't cost me anything?
                  You can sell the equivalent amount of shares with $40k in capital gains tax-free, because the $40K in capital losses offset.

                  With purchase price of $150K and a current value of $210, you could sell two thirds with a basis of $100K and a sale price of $140K and have no taxable capital gains. If you sell any of the remaining $70K it will be subject to short-term capital gains taxes of $20K/$70K * the sale price.

                  All of this assumes these exact dollar amounts. Any difference in valuations will change the exact amounts, but not the general facts.

                  Comment

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