Say I've got an investment account (non-retirement, brokerage account, all post-tax). I've invested $10,000 into the account and it has appreciated $2,000.

I want to sell the $10,000 investment because it will not be taxed and leave the $2,000 to appreciate farther.

Can I just sell $10,000 from the account and not get taxed? How is this all calculated?


1 Answer 1


If the investment is stock shares or mutual fund shares and the only thing that has happened since you invested is that the per-share price went up (there were no dividends paid or mutual fund distributions that occurred between the purchase and today) so your investment is now worth $12,000, then by all means you can withdraw $10,000 from your investment, but you cannot withdraw only the original investment and leave the gains in the account; your withdrawal will be partly the original post-tax money that you put in (and it will be not be taxed upon withdrawal) and partly the gains on which you will owe tax.

More specifically, suppose that you bought 1000 mutual fund shares at $10 with your $10,000 and the price has now increased to $12 per share. If you tell your broker/mutual fund company that you wish to get $10,000 in cash, the company will redeem 833.3333 shares at $12/share and send you $10,000 cash. You still own 166.6667 shares worth $2000 as of today in which you have a basis (original investment amount that will not be taxed upon withdrawal) of $1,666.67. Of that $10,000 that you received today, 833.3333x$10 = $8,333.33 is not taxable to you since it is post-tax money that you put in originally and is now being returned to you. The rest, namely $1,666,67, is taxable capital gains. In the US, if all this happened within the space of one year, the capital gains are short-term capital gains and are taxed as ordinary income. If you held the shares for more than one year, the capital gains are long-term capital gains and are taxed at a lower rate. Some other countries also have favorable treatment of capital gains a compared to ordinary income such as wages and interest.

Note that the above example will not work well with stock shares which must be bought and sold in integer numbers whereas mutual fund houses will gladly sell or redeem fractional shares.

  • Note this is also assuming that the entire $10,000 was invested all at once (with all shares bought at the same price). If the $10,000 was invested over time, with different lots bought at different prices, it may be possible to sell individual lots to finagle a desired result in terms of cash in hand versus realized gain/loss.
    – BrenBarn
    Commented May 15, 2018 at 18:59
  • @BrenBarn Yes, of course. With different dates of purchase, even if all the purchases are at the same price, it is possible that some of that redemption will result in short-term gains and some in long-term gains, and so that is another angle to keep in mind, and play with. Commented May 15, 2018 at 20:06

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