I'm working on a loan in California and the bank will offer me a discounted rate if I have more assets on deposit with them.

I have the assets on deposit with vanguard in admiral shares (so not readily transferable to the other bank) I could liquidate those and move the money into the bank, then move it back to the same funds at vanguard later.

Edit: to clarify these are brokerage funds. The IRAs don't affect me here because I can transfer them into a new IRA at the lending bank without causing a tax event.

Capital gains will be substantial, and since I'm not actually extracting any capital I'm hoping not to pay them. Is there a path through this?

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    Just because you plan to rebuy the same shares doesn't mean you aren't extracting capital. – chepner May 4 at 21:14
  • Understood, which is why I'm asking about it. In real estate, for example, we can use a 1031 exchange. – Matthew May 4 at 21:39
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    Assuming that the assets are retirement. You should ask the bank if they accept in-kind Vanguard Admiral shares. Based on the last post in this thread: bogleheads.org/forum/viewtopic.php?t=268148 Alternatively the conversion to ETF and then transfer is another possibility. – Morrison Chang May 4 at 22:14
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    Please clarify whether the Vanguard funds are in a tax-advantaged retirement account. If so, there are no capital gains taxes per se, but there are potential penalties if you don't do a proper rollover. – nanoman May 4 at 23:25
  • You say the admiral shares are not readily transferable - have you talked through with the mortgage-bank what this might look like if you pursued that path? Depending on values they might be happy to help if they felt it would lock you in as a customer. – Grade 'Eh' Bacon May 5 at 13:40

In a taxable account the moment you sell those shares, you have a transaction that has tax implications.

If the investment is in a retirement account, pulling the money out of the retirement account can also trigger penalties, depending on your age.

We sometimes see questions related to selling investments but keeping it in the brokerage account to delay owing taxes. In those cases keeping the funds in the brokerage account doesn't avoid it being a taxable event. Thus moving the money to your bank will run into the same problem.

Of course if you sell losers then there wouldn't be any capital gains. But then you might run into a situation if you repurchase the shares too soon and run into a wash sale issue.

Now if it was in a retirement account, and you rolled it over and took possession of the funds, then deposited them in the bank, and then moved them into another retirement account (or even the same retirement account) before the 60 day window was up; you could avoid the taxes and penalty. Except the lender might not be comfortable with the last minute influx of money. They always want an explanation regarding the source of late large deposits.

Information on the 60 day window from the IRS:Rollovers of Retirement Plan and IRA Distributions

60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.

Because you updated that the money is in an IRA, and the lending bank also has IRA accounts, you can just transfer the money without worrying about the 60 day window. Please check that this will meet the requirements to get the better loan rate. Also some banks don't have as many options regarding IRA investments, so the money might still only be in the bank long enough to meet the loan requirements.

  • Can you tell me more about the 60-day window you mentioned? – Matthew May 4 at 22:13
  • You can also directly transfer an IRA or employer plan to a new (or different) IRA with no withholding 'leak', no worries about the 60-day window, and no one-per-year limit. And OP says in Q they have already done so. – dave_thompson_085 May 5 at 7:46
  • Added more info because the mention of the 60 day window caused additional facts to be added to the question. – mhoran_psprep May 5 at 9:56

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