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Author: jocave One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25223  
Subject: Special rules on company stock Date: 3/10/1999 1:48 PM
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I came across something on the NY Times site that really confused me. They seem to be claiming that company stock in a 401(k) has special rules when it comes time to retire. Perhaps someone here can explain, because I find it hard to believe.

http://www.nytimes.com/aponline/f/AP-Financial-Stocks.html

If you are ready to retire and you have a lot of company stock in your retirement plan, don't automatically roll the plan proceeds into an individual retirement account, Schmitt says.

You have the option of taking the stock out as part of a lump sum. You'll pay regular income taxes on the stock, but only on the value of the stock at the time it was put into your account.

Any appreciation in the value of the stock since then is not taxed until you sell it, and then it will be taxed only at the capital gains rate. If you keep the stock until your death, it will pass to your heirs at its current market value, avoiding capital gains taxes entirely (though not necessarily estate taxes). If you roll the stock into an IRA instead, you'll pay regular income taxes on it when you withdraw it.
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