I have LTCG Withdrawal Strategy set to "Withdraw capital gains last" and yet taxable rebalancing that sells stocks still generates capital gains. This selling is not technically a withdrawal and yet presumably could be done (IRL) in a way that avoids generating capital gains, in the same way that selling to withdraw funds can avoid them (at least until the basis is exhausted). Am I confused about something, or should taxable rebalancing also follow the specified LTCG withdrawal strategy?
@plaut Hi, you are correct. The recently implemented realization of LTCG on asset class rebalancing does not apply the LTCG withdrawal strategy on rebalancing sales of overallocated assets. Instead it assumes that LTCG is realized on the amount 'sold' in pro-portion to the unrealized LTCG as a % of the asset's balance.
Withdrawals, on the other hand, do apply the LTCG strategy to track unrealized and realized LTCG by asset class.
Here are 2 additional, follow-on changes needed for full implementation of the recent rebalancing change:
- as you note: apply the LTCG withdrawal strategy when 'selling' overallocated assets during rebalancing
- add an input page for you to allocate the total unrealized LTCG, entered on the Initial Balances Page, by asset class.
FYI, this change was surprisingly complex to implement and requires tracking unrealized LTCG by asset class for every scenario year. Transfers to external accounts (which do not trigger realized LTCG) and calculating LTCG realized on the account management fee, are examples of why what might have seemed simple, is not.
