keeping company stock shares when requesting 401(k) distribution

[Cathy from Chicago]

Where can I find information on the tax implications if one chooses to keep the shares of company stock which is a part of ones 401(k)?

[BPickerCPA]

I have a section of that topic in my guide, "Barry Picker's Guide to Retirement Distribution Planning". Ed Slott discussed this in a previous issue of his newsletter. I'm sure it's in other books and articles.

[alanm]

The answer is in Baron's March 27, 2000 issue page R16.

When you transfer company stock out of the 401k plan, don't do it to an IRA or ask for a liquidation check, transfer in kind the shares to a taxable brokerage account and you will be taxed on the cost basis not the appreciated value. Later when you sell the stock, you will will taxed at the long term capital gains rate not as ordinary income.

[Cathy from Chicago]

thanks so much for a specific answer. I knew there was something 'special' about company stock in a 401(k) but I just couldn't remember!

[Guest benji]

Make Sure you research NUA- Net Unrealized Appreciation. This is a tax strategy that only relates to your employers stock in your employers qualified Retirement Plan. It is a very favorable way of distributing company stock out of a Retirement Plan. Before you roll it out of the plan, look into this.