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I have some traditional IRA funds invested in QuantumScape, and it's down quite a bit since the initial purchase. I want to continue to have some holdings in the company. Would this be a good time to move this stock to my Ruth IRA?

The question presupposes it won't lose much more value. My question is primarily about the tax implications if it's moved now vs. when it's higher.

Additionally, I'd like to understand what I pay taxes on. I would only pay taxes on an increase in value, correct? So since I've lost money on QuantumScape, I could move another stock that's gained money such that they roughly offset, and the taxes would be minimized, correct?

Harry Underbridge
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2 Answers2

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All transactions inside the IRA are without tax relevance. You can buy and sell as much as you want, you never owe taxes (and never get deductions).

Taxes only apply when money moves out of the IRA, be it into the Roth or into your pocket. At that time, the full amount is considered taxable income.

Yes, it is a good idea to convert to Roth at a low price - it might be hard to guess the lowest day, but you can try to time it, and it’s to your advantage if you manage to.
I always do that; whenever there are some bad days in a row, I convert some shares.

Aganju
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I would only pay taxes on an increase in value, correct?

You'll pay taxes (and possibly penalties) on whatever money is taken out of the IRA.

Note that you can't typically move "stock" between IRA accounts - only cash. You'd get the same effect by selling the stock in your IRA, doing a rollover (or just contributing) in that amount to your Roth, and then buying the stock in the Roth. You'd still pay tax on the amount that you rollover, whether or not it funded by a gain or loss in the account.

D Stanley
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