If I make multiple deposits into a brokerage account, can I pull out all the money I deposited tax-free, or only the initial deposit to open the account? My question is based on the first-in, first-out (FIFO) method. For example, I open a brokerage account with $70,000 in 2015 and the account grows to $100,000, I then deposit another $15,000 in 2016 and the account grows to $150,000. Can I pull the whole $85,000 out tax-free, or can I only pull the initial $70,000 before I must start paying taxes?
The type of account is important to answer the question properly. If this is a personal account, you should be paying tax on realized gains in the year the transaction occurs. If this is a retirement account, the rules are quite different.
I recommend that you speak with a professional in person on this matter, and be sure to indicate the kind of account that is in question.
Answered by: Larry M. Carroll, CPA, is an individual practitioner with Larry M. Carroll CPA PC in Blue Bell, Pa.