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Subject:  Re: 401k to IRA Date:  8/20/1999  11:08 AM
Author:  intercst Number:  13289 of 88766

buzman asks,

>>If you rollover the shares into an IRA, you pay ordinary income tax rates (max=39.6%)on
any gains.<<
I'm just asking, I'm not saying you are wrong. I thought you could rollover a 401 to a IRA with
no tax ramifications. I eagerly await your reply.
I want to impress my wife with my new-found knowledge,
she's an accountant.


You're correct that you can rollover assets from a 401k to an IRA without paying any tax.

I'm referring to the tax you pay when you withdraw money from your IRA. (Presumably, at some point in the future you'll want to spend some of the money.) All withdrawals from an IRA are taxed as ordinary income (max=39.6%). If you can use the "net unrealzed appreciation" (NUA) loophole on your company stock any gains above your cost basis are taxed as capital gains (max=20%). It's a HUGE difference if you have highly appreciated company stock in your 401k.

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