JAFO asks:<<The only way to take advantage of NUA of company stock is to take a complete distribution of the enitrety of the 401-k. Income tax on stock would be on its basis. Income tax on balance of plan would be at marginal tax rate; income tax on balance of plan could be postponed by rollover into a new (or another) regular IRA. Once balance is in an IRA usual rules for transfer to Roth IRA would apply.>>That is correct.<<In addition, the only ways to avoid the 10% penalty are either (i) to be retiring, or have retired, from the company in the calendar year in which one turns 55, or (ii) if one left the company long before 55, wait until after reaching 59 1/2 to receive distribution.>>That is also correct.<<WRT to the company stock, the date of distribution serves as the start of a new holding periof for measuring STCG v. LTCG, so company stock would need to be held for one year after distribution and then subsequently sold in order to receive LTCG treatment.>>That is almost correct. The stock could actually be sold the next day and any unrecognized gain as of the date of distribution (i.e., the Net Unrealized Appreciation (NUA)) from the plan will be treated as a long-term capital gain. Any gain in addition to that of the NUA at distribution will be a long- or short-term gain based on the holding period which begins the day after the day the plan trustee delivered the shares to the transfer agent. (Proposed Reg 1.402(a)-1(b) and Revenue Ruling 74-398, 1974-2 CB 136)Regards..Pixy
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