# Switching Brokers: Does an ACATS Transfer Trigger Taxes?

Source: https://cluenex.com/learn/portfolio-management/switching-brokers-acat-transfer/
Publisher: Cluenex (https://cluenex.com)
Updated: 2026-10-15

## Short answer

An in-kind ACATS transfer moves your existing holdings to a new broker without selling them, so no capital gains tax is triggered and cost basis carries over for covered securities. FINRA Rule 11870 gives the old broker one business day to validate and three more to deliver.

## Key takeaways

- An in-kind ACATS transfer changes who keeps the records of your shares. Nothing is sold, so no gain is realized and no capital gains tax is owed.
- FINRA Rule 11870 sets the clock: the delivering firm validates or takes exception within one business day, then completes delivery within three business days after validation.
- The risk is not the transfer itself but what cannot move: proprietary funds, some fractional shares and certain other assets may have to be sold, and that sale is taxable.
- Cost basis for covered securities travels with the position, but it can arrive late. Save a statement with lots and purchase dates before you start.
- IRAs should move by direct trustee-to-trustee transfer, never by taking a check yourself.

## What is an ACATS transfer?

An **ACATS transfer** (Automated Customer Account Transfer Service) is the standard electronic process for moving a customer's securities from one US brokerage to another. An **in-kind** transfer moves the positions themselves instead of cash, so nothing is sold.

This works because shares are electronic book-entry records, not paper certificates in a vault. A broker is the recordkeeper of who owns what, so changing brokers changes the recordkeeper. It is not a sale and a repurchase.

ACATS is run by the National Securities Clearing Corporation (NSCC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC), and most US brokers take part.

## How long does an ACATS transfer take?

FINRA Rule 11870 gives the delivering firm one business day to validate or take exception to a transfer instruction, then three business days after validation to complete the transfer. In practice, plan on about a week from the moment you submit the request.

The process starts at the **receiving** firm, not the one you are leaving.

| Step | Who acts | Timing under FINRA Rule 11870 |
|---|---|---|
| Submit transfer request | You, at the receiving firm | Whenever you choose |
| Validate or take exception | Delivering firm | Within 1 business day |
| Complete delivery | Delivering firm | Within 3 business days after validation |
| Positions appear | Receiving firm | When delivery settles |

The most common cause of delay is an account mismatch. A different name spelling, address or account type can lead to an exception instead of a validation, which restarts the clock.

## Does an ACATS transfer trigger capital gains tax?

No. An in-kind transfer is not a sale, so no gain or loss is realized and no capital gains tax is owed. Your holding period continues without interruption.

Tax appears only when a position is sold. That happens if you choose a cash transfer, or if a holding cannot move and must be liquidated.

**Cost basis** is the original purchase price used to calculate gain or loss. For covered securities, brokers must pass cost basis information to the receiving firm under IRS reporting rules. The data sometimes arrives after the shares, so positions may show basis as pending for a while.

Holding period matters as much as basis. Suppose you bought a stock 11 months ago, and it is sold during the move and rebought at the new broker. The one-year clock restarts, so a later sale could be taxed as a short-term gain instead of a long-term one.

> The one instruction that matters: ask the new broker for a full in-kind ACATS transfer. Some forms offer a cash (liquidation) option, and choosing it turns a tax-free move into a taxable one.

## What cannot be transferred through ACATS?

Holdings the receiving broker does not support generally cannot move. These often include:

- **Proprietary mutual funds** sold only by the old broker.
- **Fractional shares**, which many brokers cannot carry across and which are often sold for cash.
- **Some over-the-counter securities and alternative investments**, depending on what the new firm accepts.

Anything that cannot move usually has to be sold, and a sale of a position with a gain is a taxable event. Open orders are typically cancelled during a transfer. Margin balances, options positions and pending corporate actions can delay or block a transfer, and options need matching approval levels at the new firm.

## How do you move an IRA to a new broker?

Ask for a **direct trustee-to-trustee transfer** between the two IRA custodians. It has no tax effect and does not start the 60-day rollover clock.

If you take a distribution yourself and redeposit it, the 60-day rollover rules apply, and the IRS limits you to one such IRA rollover in 12 months. For an eligible rollover distribution paid from an employer plan such as a 401(k), the plan must withhold 20% for federal tax if the money is paid to you. The direct route avoids all of this.

## Will the old broker charge a fee?

Many brokers charge an outgoing account transfer fee. Amounts vary by firm and are listed in each firm's fee schedule, so check the current figure before you start. Many receiving brokers will reimburse it, but usually only if you ask and show the charge on a statement.

## When does this guide not apply?

The tax-free result applies to in-kind moves of taxable and retirement accounts within the US system. It does not cover:

- Cash transfers, which are sales.
- Positions that must be sold because the new broker cannot hold them.
- Employer plan rollovers that you take possession of.
- Accounts held at brokers that do not take part in ACATS.

A cash bonus for switching is also not automatically worth it. Compare it with the transfer fee, any tax on positions you must sell, ongoing costs, and any rule that locks your assets in place for a set period.

## Example: a $120,000 account, two approaches

An investor holds three things: a $70,000 index ETF with a $40,000 cost basis, $35,000 of individual stocks, and a $15,000 proprietary mutual fund with a $9,000 basis. The fund exists only at the current broker.

**In-kind path.** The ETF and stocks transfer in kind, so the $30,000 unrealized ETF gain stays unrealized. The fund must be sold: $15,000 minus $9,000 is a $6,000 gain. At a 15% long-term federal rate, that is about $900 of tax, assuming the fund was held over a year and ignoring state tax. The tax comes only from the one holding that could not move.

**Liquidation path.** Selling everything realizes the $30,000 ETF gain too. On the ETF alone, 15% of $30,000 is $4,500 of federal tax, before the stock gains and state tax. Any position held under a year would be taxed at ordinary income rates.

Same holdings, same two brokers. The box ticked on the transfer form made the difference.

## What this means for you

Before you switch, work through a short checklist:

1. Send the new broker your full position list and ask which holdings it cannot accept. Note the unrealized gain on each.
2. Start the transfer at the new broker and request a full in-kind ACATS transfer.
3. Match name, address, Social Security number and account type exactly at both firms.
4. For IRAs, request a direct trustee-to-trustee transfer.
5. Save a statement showing purchase dates and cost basis for every lot.
6. Ask in writing whether the new broker will reimburse the outgoing fee.
7. After settlement, compare share counts, basis and acquisition dates with your saved statement. Errors are easier to fix soon after the move than years later.

A broker switch is also a rare moment when every holding sits on one list. If a position must be sold anyway, that is a natural time to ask whether you want it back. For any stock you are unsure about, a free Cluenex stock page at https://cluenex.com/stocks/ (add the lowercase ticker) shows its business quality, main risk and insider activity. Related reading: [tax-loss harvesting](/learn/portfolio-management/tax-loss-harvesting/) and [how to diversify a stock portfolio](/learn/portfolio-management/portfolio-diversification/).

## Questions people ask

### Does transferring stocks between brokers trigger capital gains tax?

No, not if the transfer is in kind. An in-kind ACATS transfer moves the records without selling anything, so no gain is realized. Tax arises only on positions that are sold, such as holdings the new broker cannot carry.

### How long does an ACATS transfer take?

FINRA Rule 11870 gives the delivering firm one business day to validate or take exception and three business days after validation to deliver. Including your own setup, plan on about a week. Registration mismatches are the most common cause of delay.

### Does my cost basis transfer to the new broker?

For covered securities, yes. Brokers must pass basis information along, though it can arrive after the shares, so basis may show as pending for a time. Keep a pre-transfer statement with purchase dates and cost per lot as a backup.

### Can I transfer only part of my account?

Yes. ACATS supports partial transfers, so you can move selected positions and leave the rest. That helps if one holding cannot transfer or if you want to try a new broker first. The same in-kind rules and timeline apply.

### How do I transfer an IRA to a different broker?

Request a direct trustee-to-trustee transfer between the two custodians. It has no tax effect and no 60-day deadline. Taking the money yourself triggers rollover rules, and an employer plan distribution paid to you has 20% federal withholding.

### Will my old broker charge me to leave?

Many brokers charge an outgoing transfer fee listed in their fee schedule. Many receiving brokers reimburse it if you ask and show a statement with the charge.

## Sources

- [FINRA Rule 11870: Customer Account Transfer Contracts](https://www.finra.org/rules-guidance/rulebooks/finra-rules/11870)
- [Rollovers of Retirement Plan and IRA Distributions](https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions)
- [Topic No. 409, Capital Gains and Losses](https://www.irs.gov/taxtopics/tc409)

Cite as: Cluenex. "Switching Brokers: Does an ACATS Transfer Trigger Taxes?." Cluenex Learn, updated Oct 15, 2026. https://cluenex.com/learn/portfolio-management/switching-brokers-acat-transfer/