Today I started working on my online pralana file again after about 7 months of no activity. I understand things may look a little different due to the OBBB changes that were made, but I can't figure out why my AGI report is showing Capital Gains and it never has before. I went into the LTCG Withdrawal Strategy and changed the selection from Distribute evenly to Withdraw Capital Gains last, but that didn't change anything. I am using the Advanced Portfolio Modelling with User Mode 1 as I have always done in the past. I have no scheduled withdrawals, between SS and Divs we don't need to withdraw from the taxable account. The only thing I can think of is that the program is rebalancing the taxable account, but in the past I haven't had CGs. I'm obviously missing something, any help would be much appreciated.
@kkrupka My guess is that you're seeing the capital gains caused by rebalancing the taxable account - this improvement was included relatively recently, and currently this rebalancing does not apply the selected LTCG Withdrawal Strategy - it always uses a "Proportional" strategy.
@plaut Ughhh. So does that mean it was working incorrectly before? Is there a way to disable rebalancing of the accounts?
@kkrupka I'd say it's a better approximation of real life now compared to before. I'm not familiar with Mode 1 but I don't think there's any way not to rebalance short of holding only one asset type in taxable (e.g., 100% stocks). [In Mode 2 you'd also have to make it the highest priority account.]
@cstone Is there a workaround for this? I have TE funds in my taxable, so if were to need to withdraw, I would withdraw those, since there's no CG on that. I know that the program does not handle TE stuff well, but the CGs never used to be an issue until just recently. It cuts into what I'm able to Roth convert each year. I could ignore it, but it's not an insignificant number. Also, I'm OK with allowing the accounts to creep without rebalancing. Please advise.
@kkrupka Hi and welcome back. Please see More > Release Notes "Major Recent Changes: for changes since April 2025. I just added the rebalancing item to that list.
Based on subscriber feedback, the Aug 27 Pralana Online release added tracking of unrealized LTCG by asset class and realization of LTCG on sales of over-allocated assets during annual rebalancing. See notes below**.
There is no way to fully disable it, but you can see its effect at Analyze > Sensitivity Analysis by disabling it there and comparing various metrics in the chart and table on that page.
The Metric MRI shows the source/breakdown of realized LTCG in any of these:
- column "Taxable Qualified Dividends and LTCG" in the Taxes > Summary tab
- column "7 Capital Gains (Losses)" in the Taxes > AGI Detail tab and on the amount in
- Fed Form 1040, line 7.
On the Balance Sheet, if click on an amount, after the first plan year, the Metric MRI will show the rebalancing details, including LTCG realized by asset class. There is no rebalancing in the first plan year since Pralana assumes your account is balanced at plan start.
In your scenario 1, 2026, the Metric MRI shows Stocks were over-allocated at the end of 2025 (because their ROR is greater than average) and sold to re-balance. The Stocks sale generated LTCG. TE Bonds were under-allocated and purchased.
You have Growth Taxation set up for TE Bonds as 100% Tax Free, so they will not accumulate unrealized LTCG and (soon) should not ever realize LTCG if/when sold.
**Notes: There are 2 additional, follow-on changes needed for full implementation of the recent rebalancing change:
- Apply the applicable LTCG withdrawal strategy when 'selling' overallocated assets during rebalancing. Currently, as @plaut notes, these sales generate LTCG 'proportionately'
- Add an input page for you to allocate the total unrealized LTCG, entered on the Initial Balances Page, by asset class. Currently, the total unrealized LTCG entered for the Taxable account on the Initial Balances page is pro-rated to asset classes per the first plan year's asset allocation.
In your case, that means Bonds TE are getting allocated 28% of your total initial LTCG (for now) but in none of your scenarios does it appear that LTCG is ever realized on Bonds TE for the reasons you noted above.
Also, if you set your LTCG Withdrawal Strategy back to 'Last', any withdrawals from the Taxable account do honor that setting.
