UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next
Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75378  
Subject: Inheriting "company stock" NUA Date: 3/25/2000 12:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Barrons' had a good series on Retirement in today's issue. I have a specific question on the article about "company stock".

http://interactive.wsj.com/pages/b-retire.htm

Barrons states:

Your heirs stand to gain, too. If you hold on to the NUA stock until you die, your heirs will receive a step-up in basis, meaning they will owe capital-gains taxes only on the difference between the price when you died and the price when they sell it. In other words, all of those gains over the years will be passed on free of capital-gains taxes (though not free of estate taxes). If, on the other hand, you roll the stock into an IRA, your heirs won't get this step-up in basis. All distributions will be taxed as ordinary income, and then what's left will be taxed in your estate.

However, I've found this elsewhere:

IRS Revenue Ruling #75-125 states that the "net unrealized appreciation" NUA (at time of distribution) is "income in respect to the decedent," and is subject to the long term capital gains tax to the heirs, just like any other pension benefit not yet taxed to the deceased. That's why the August 16, 1999 issue of Fortune, Page 120, had this to say regarding company stock in a 401(k): "One consideration: If you never sell those shares, your heirs wind up owing capital gains on the appreciation going all the way to their value when they originally came into your possession. That's a lot more than they'll owe on the other stock they inherit, which is only taxed on the appreciation since your death. If you have a choice, then, sell your company stock to meet retirement expenses and leave other assets to the kids."

Question: Does anyone know if the IRS has issued a ruling that supercedes #75-125 and changes the taxation of "company stock" held at death?

intercst
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Berkshire Hathaway

Is the Market Overvalued?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement