[USER]

I have a significant amount of money invested in Mutual Funds and for the past several years, they throw off some high Capital Gains and this is impacting the taxes I owe to Uncle Sam.

I would like to back away from the Mutual Funds and reinvest elsewhere.

Any ideas as to the best exit strategy to minimize a huge taxable event(s)?

Thank you.

[Jose]

Firstly, if you’re planning to exit, strategically unwind the positions over multiple tax years to avoid a spike in your bracket.

Start with funds that are least tax-efficient (like ULTRA), and consider harvesting losses from other parts of your portfolio (if available) to offset realized gains.

Also consider moving into tax-efficient ETFs or index funds, which generally don’t distribute gains the same way due to their in-kind redemption structure.

Think VTI, SCHD, VOO, funds designed for compounding, not tax leakage.

If you’re holding these inside a taxable account (not a tax-sheltered IRA), also look at direct indexing or SMAs (Separately Managed Accounts), which can offer built-in tax-loss harvesting.

if you also want income and are comfortable with higher-level strategies, covered calls on ETF holdings can replicate yield without triggering the same tax consequences, while keeping control over the underlying.

Bottom line: you’re paying the price for holding legacy fund structures that aren’t built for modern tax-efficiency.

Start your exit, pair it with loss harvesting, and rotate into vehicles that work with the tax code, not against it.

you’re in a great position to optimize.

[Jule]

The gains are not realized until you sell and take the gains. Then you pay a portion of the gains you sold, as tax.

Would you rather make less money?

If so, keep it in your checking account paying .01% and you don’t have any gains issues

[Scott]

I am assuming you mean in your brokerage account. Ira’s and Roth Ira’s are not taxable events and when you use that money you’ll be taxed at your income level for the Ira, and you won’t be taxed for the Roth. With regard to your brokerage account.

You can sell specific lots, choose the lots that are showing a loss, and sell ones that are at a profit to net them. Also sell anything else that’s underwater to net against your gains.

You can also time the sales to low income years to minimize the pain.

Other than that, there’s not much that comes to mind. Lastly make sure you match short term and long term when you do it.

[Sickels]

Are you selling that’s why you have capital gains? How much money are we talking about?

[Author]

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