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Author: arrete Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 124931  
Subject: Non-qualified dividends from 401K Date: 10/29/2004 10:16 AM
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My husband is receiving dividends from stock in a 401K. The dividends are reported as non-qualified dividends for tax purposes, meaning they are not eligible for the preferential treatment many dividends get by being taxed at the capital gains rate. These dividends, like REIT dividends, are taxed at the personal rate.

When he takes his lump sum of stock at 59 1/2 and pays personal rate on the cost basis and then pops the stock into a taxable account, do the dividends from this stock revert to the nifty lower rate? One would think so, but we can't find anything written about it.

I hope that wasn't too confusing. TMFPMarti suggested that I put this out as its own thread. I know a similar question is at the end of another thread.

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