Company stock in 401k distribution

You are here:
< Back

L1: Company stock in 401k distributionI turned 50 on 12/21/2002 and plan to retire next year. I have some company stock and cash in my 401k that will have to be rolled into an IRA after retirement.What is the best way to accomplish this. I have read some articles about having the company issue the stock in certificates and roll the cash into a IRA. This has something to do with the value of the stock at the time of the distribution. Does this generate a large tax savings?2002-12-27 22:43, By: Lee, IP: [127.0.0.1]
L2: Company stock in 401k distributionHello Lee:
The feature to which you refer is called “net unrealized appreciation” governed by IRC 402(e)(4) & related regulations (which are lengthy). The essence of which is that you can take possession of the stock directly while rolling the other 401(k) assets to an IRA. When you do this you pay taxes and the 10% penalty on the trustee”s cost basis of the stock, not its current market value. Then when you sell the stock you pay long-term capital gains as opposed to regular income tax. Generally speaking, the trustees basis in the stock (and your trustee knows this number) needs to be 50% or less of its current market value for this treatment to work effectively.
This is not an easy subject & the above is just the barest of an outline. I strongly suggest you seek professional assistance to evaluate & execute your options.
TheBadger
wjstecker@wispertel.net
2002-12-27 22:54, By: TheBadger, IP: [127.0.0.1]