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What are the cash-out tax liabilities of a 457 deferred compensation p

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#1 RoBuck


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Posted 17 July 2000 - 11:17 AM

As I retire from contributing to a 457 deferred compensation plan, what tax liabilities do I face in cashing out?

Is the total withdrawal amount considered current income in this year?

Two thirds of the total amount is the result of investment capital gain - would that be taxed at the capital gains rate?

Are there advantages to taking, say, three years to withdraw the total funds ?

#2 Carol V. Calhoun

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Posted 23 September 2000 - 06:02 PM

I'm afraid that the entire amount is ordinary income. That is true even with respect to the part derived from long-term capital gains.

The only advantages to taking three years to withdraw the funds are that (a) the tax is deferred with respect to the portion of the amounts as to which the distribution is deferred, and (B) this can in some instances prevent a spike in income from pushing you into a higher tax bracket.

#3 jlf


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Posted 24 September 2000 - 11:16 AM

Wait....the Senate is about to vote on the RSSA of 2000.
If this bill becomes law you will be able to rollover your DC account to an IRA!!!! This would be just grand for you guys and gals.

Best wishes,
Joel L. Frank