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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Moving Company stock in 401K Date: 7/31/2002 9:48 PM
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<<When I retired I left my 401K intact because I was satisfied with the funds that were available and also since I was 55, I could make withdrawals without paying the 10% penalty.>>

Ok...in effect you decided to leave your 401k account with your prior employer...at least that's what I'm reading here. Please correct me if I'm wrong.

<< This is working out for me but one thing I would like to do is transfer some of my company stock which makes up more than 30% of the money in my 401K into the other funds in my 401K.>>

Ok...seems reasonable.

<< When I called to make sure I could do this they said I could but the pre 1990 common stock would have different tax implications than post 1990.>>

True...IF you decided to take the stock as a distribution. But that's not your plan as I read it. You're simply liquidating the shares within the 401k, and reallocating the assets within the 401k. Which means that the tax implications at this time are nill.

<< They said that I would have to see a tax advisor for just what needs to be done as far as taxes goes. I figured that they would just sell the stock and put the money into the funds that I picked and when I made withdrawals I would pay ordinary income tax on it.>>

And that's what normally happens. Which is why I think that somebody got confused relative to the conversation. They might have thought that you wanted to take a DISTRIBUTION of either the shares or the cash...which caused them to make that statement. I'm no 401k specialists, but I don't think that there is any tax event if the funds remain in the 401k.

<<Does anyone have any information for me or know where I can find some information so I can make the right decision.>>

Well...I'd call again...and make sure that everybody is on the same page and verse...that the funds would remain in the 401k account...that you're simply reallocating the assets in your 401k account. If they continue to respond that there are tax implications, ask them the $64k question...WHY? They might pass you off with the "consult a tax advisor" crap, but as least you tried.

Then ask them if they could provide you with any WRITTEN information as to why making such a reallocation would generate a taxable transaction. And if none of that works, drop on back here, make a new post, and I'll get TMF Pixy (our resident pension plan guru) to take a look at your problem and see what his thoughts might be.

Hope this helps...
TMF Taxes
Roy
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