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I'm humbled by the fact I couldn't find a direct answer to this anywhere so if one exists already just let me know and I'll del this one.

My question is, say you have an Ameritrade (or similiar) trading account. When you sell one stock, and purchase another while never actually withdrawing any funds to your personal bank accounts. Are you taxed via capital gains just for selling and purchasing. Or when you actually withdraw/transfer funds out of Ameritrade and into your personal bank account?

Or to put in a scenario. If I sell stock, purchase other, but never actually transfer any funds back into a personal account do I still need to consider capital gains realization? Or only when I actually transfer funds from Ameritrade back to my bank?

I'm sure it's a dumb question but I would love a more definitive answer from someone with experience. Thanks.

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    Assuming the account is not a tax sheltered account, then yes, you are liable to account for capital gains when you sell any share holding, whether or not you withdraw the money from the account.
    – not-nick
    Jun 20, 2016 at 16:52

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Outside of a tax sheltered IRA or 401(k) type of account your transactions may trigger tax liability. However, transactions are not taxed immediately at the time of the transaction; and up to a certain limits capital gains can be offset by capital losses which can mitigate your liability at tax time. Also, remember that dividend receipts are taxable income as well.

As others have said, this has nothing to do with whether or not money has been moved out of the account.

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Taxes are triggered when you sell the individual stock.

The IRS doesn't care which of your accounts the money is in. They view all your bank and brokerage accounts as if they are one big account mashed together.

That kind of lumping is standard accounting practice for businesses. P/L, balance sheets, cash flow statements etc. will clump cash accounts as "cash".

Taxes are also triggered when they pay you a dividend. That's why ETFs are preferable to mutual funds; ETFs automatically fold the dividends back into the ETF's value, so it doesn't cause a taxable event. Less paperwork.

None of the above applies to retirement accounts. They are special. You don't report activity inside retirement accounts, because it would be very hard for regular folk to do that reporting, so that would discourage them from taking IRAs. Taxes are paid at withdrawal time (or in Roth's, never.)

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It is not a dump question because it concerns your most important invisible financial partner:the taxman.

The answer depends of the legal status of this account. If your account is 401(k) in USA or RRSP in Canada, the answer is no.

No capital gain taxes if your money is registered for retirement. You'll pay later on, as taxes are like death, unavoidable.

Yes capital gain if your money is not in an retirement account. As soon as you realize a capital gain, it becomes taxable in that fiscal year.

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  • If the account is a 401k or traditional IRA, then the taxable event is exactly and precisely when a withdrawal is made, whether in retirement or at an ill-advised younger juncture.
    – user662852
    Jun 20, 2016 at 22:35

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