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    ThatcherAdams's Avatar
    ThatcherAdams Posts: 1, Reputation: 1
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    #1

    Mar 8, 2011, 05:19 PM
    Taxes on Education Stock
    So I just found out that I have stock in American Funds Growth Fund of America that a relative bought me when I was born. Apparently since these shares are meant to go towards education, they aren't taxed, but if I withdraw them for purposes that aren't educational, they will be taxed. (I'm sorry, I really don't know much at all about the stock market)

    Does anyone know what percentage will be taxed if I cash in?
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
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    #2

    Mar 8, 2011, 07:32 PM

    At the tax rate you are taxed on all of your other income
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #3

    Mar 9, 2011, 06:45 AM

    Thatcher - whoever told you that investments intended for education purposes are tax exempt is mistaken. It is possible to DEFER taxes until you withdraw the funds (that's one of the benefits of a 529 account or IRA, for example), but when you withdraw the funds you have to pay taxes on any reinvested earnings and capital gains. What type of account did the relative set up for you when he gifted this money to you? Was it a 529 account?
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