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Not sure if it was asked before, but how do we purify our investments made in retirement accounts such as a ROTH IRA? Since we cannot take out the money without incurring penalties and taxes, I’d rather not take out anything. Is the only way to purify to just keep the haram money as cash instead of re-investing it?
Thanks
Welcome, @keskinmbaha! Once you’ve calculated your purification amount, the simplest option is to pay out of your cash holdings from your checkings/savings account. I also use a service called CharityVest that makes it easy to donate your stocks directly allowing you to take a larger deduction and also avoid capital gains tax.
Got it. However, when looking at the purification FAQ, I am still a bit confused about how to purify, more specifically the differences between purifying capital gains and purifying when holding the stock. I read in the FAQ that even with a compliant company we should follow the same steps as “if the business screen fails”, yet I don’t quite understand how it should work. Here is where my confusion stems from:
If a company becomes non-compliant (either through the financial or business screen), 2 years after I bought it, and I immediately sell (within 90 days) can I count any gains as being complaint gains?
If I bought 1 share of company XYZ at $100 and one year goes by and the 1 share I own is still at $100, there is no need to purify since there’s been no gain, correct?
Similarly, if the 1 stock I own becomes $105 and the company has the following metrics:
Total non-compliant revenue: $10mil of out $1bil
Total outstanding shares: 1mil shares
Then would the amount I need to purify be ($10 mil / 1 mil) * 1 share = $10? Thus, at the end of the purification, I would have $95 worth of the stock? I feel like I am incorrectly applying the method because to me it does not make sense that in some instances, I would need to purify all my gains and some of my initial investment.
Which comes to my last point: What are the purification methods for unrealized gains and capital/realized gains? Are they the same? Can you give an example(s)?
If you can answer these questions, it would be greatly appreciated.