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ESOP transfer

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Bybar20

L1: ESOP transferI read in another post that you should never roll over an ESOP into an rollover IRA. I am allowed to take 25% of my ESOP and transfer it into my IRA. The company is a closed corporation and thus the stock is only held by the employees. I am 59 and plan to retire at the end of this year and will be 60 years old. Our company has changed the rules on getting the money from the ESOP at retirement to a five year equal payments. If I take out the 25% now that would allow me to invest that portion of the money now. What is the down side of rolling it over? The value of my stock is about $80,000.
Steve
2007-03-18 10:53, By: bar20, IP: [65.54.97.195]

L2: ESOP transferNot knowing the context of the other post, the only reason I can think of why the IRA rollover would be inadvisable is that it would cause forfeiture of any NUA benefit on highly appreciated employer stock. Under NUA, you report the cost basis as ordinary income in the year of a qualified lump sum distribution, and the NUA is taxed later when the shares are sold in the taxable account at the lower LT cap gain rates.2007-03-18 11:12, By: Alan S., IP: [24.116.66.98]

L2: ESOP transferI purchased none of the stock, it was given to me by the company. Also I have been told the value of the stock will probably go down this year. About 40% of our business has to do with new housing starts.
Steve2007-03-18 11:26, By: bar20, IP: [65.54.97.195]

L2: ESOP transferIf he is only able to take 25% of his ESOP and roll it to his IRA, would he even qualify for the NUA tax treatment? I thought you had to do a complete rollover to qualify. 2007-03-18 16:59, By: can, IP: [69.250.160.85]

L2: ESOP transferYes, taking distributions does not bar a later qualified LSD aslong as a new triggering event wipes the slate clean. Of course, any prior distributions are not eligible for NUA, only those shares distributed as part of the final LSD that does qualify. The NUA LSD rules are totally different that those for 10 year averaging and cap gain.
For the original poster, the taxable cost basis includes what the company bought the shares for even if you paid -0-. However, if the shares are about to drop sharply, disposing of them ASAP would trump any NUA or other tax benefit.

2007-03-18 21:48, By: Alan S., IP: [24.116.66.98]

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