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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75871  
Subject: Re: Rollover, or stand pat? Date: 6/5/2001 9:59 AM
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I don't know the details, but I recall there being something favorable about the treatment of company stock when withdrawn at retirement.

Here's more:

"Here's why. When you retire, if you take a distribution of your company stock, you will pay income tax on the cost basis of the stock - that is, what it was worth when you acquired it, not what it is worth when you withdraw it."

"Say you have 1,000 shares at a cost basis of $15. When you withdraw it, the market price is $40 a share. You will pay tax on $15,000 rather than $40,000. If you sell the stock, you will pay capital gains tax on the difference between the cost basis and the sales price."

"Now, say that you rolled those shares into an IRA instead of withdrawing them. You wouldn't pay any tax when you made the rollover. However, when you sold the stock you would have to pay income tax on the full value of the stock. Keep in mind that capital gains tax, at 20%, is probably going to be lower than your income tax."

"If you roll the stock into an IRA, you don't pay tax right away so you'll have use of that (tax) money for a longer time. If you don't plan on selling the stock soon (at which point you'll have to pay tax), this could be an advantage. On the other hand, if you don't roll the stock into an IRA you may also have an advantage if you hold the stock for a longer time, if it continues to appreciate, because you benefit from the lower capital gains tax on the appreciation."

http://www.401kafe.com/commentary/feature/feature_091099.html
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