Can I get around PDT rule by moving long term investments?

J

joeltrades

Hi, So I have 2 accounts. One at broker X and another at Y. I use broker X only for long term investments, things I would never sell any time soon. In broker Y, I only have cash for day trading.

Unfortunately, Y is a margin account and has less than 25k triggering the PDT rule. Does the PDT rule require all of the 25k to be cash? Because what I was thinking was moving some of my equities from X to Y (basically I will sell equities in X and buy the same long-term equities in Y).

My question is simple: Can the 25k requirement in Y be partially longer term equities and partially cash I can use for day-trading? Follow-up question: What happens if the longer-term equities drop in value?

Thanks for any help.
 
That is kind of you to offer for me to call you. So I know its obvious but just to be doubly sure - if my long-term equity (not cash) ever cause the a/c to below 25k while those equities are being held, then I get back to being under PDT, correct? I guess that's the risk of not having the 25k in cash... correct?
 
If you're moving everything into one account, all that matters for PDT is your Net Liquidation of that account. As soon as it stays above 25k you're fine.
 
joeltrades said:
Can the 25k requirement in Y be partially longer term equities and partially cash I can use for day-trading?
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Yes.
joeltrades said:
Follow-up question: What happens if the longer-term equities drop in value?
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When the combined value of cash and equity drops below 25 k USD the PDT rule becomes active again. And remains active until your account value gets above the 25 k USD threshold.
 
One of the obvious problems is taxation right? So if my long term investment had gain, then just the act of selling it in X and buying back Y will trigger tax? :( I might gradually sell investments which are losers and rebuy them but that'll take time.
 
joeltrades said:
One of the obvious problems is taxation right? So if my long term investment had gain, then just the act of selling it in X and buying back Y will trigger tax? :( I might gradually sell investments which are losers and rebuy them but that'll take time.
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Which is why I'm pretty sure you can transfer your holdings from one broker to the other. It's an account transfer request, from new broker to former. That way you don't incur a tax penalty .
 
VicBee said:
As far as I know you should be able to transfer your investment account from broker X to broker Y without having to sell and buy back.
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%%
ALMOST certain to be true, assume its stocks, etfs; not all can be transferred without selling. Hope he double checks it, because for his post looks like he messed up confusing broker x + y.
Allow 4 weeks or more with SCHW transfer; could take only a week, but allow 4 weeks or more.
DONT think taxes are triggered unless he has the transfer mailed to his home of office.....
SCHW doesnt want anything sold while transfer is being processed.
 
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