Net Unrealized Appreciation on Distributions of Company Stock
What are the tax ramifications of withdrawing company shares of stock out of a 401(k) if any? If there are tax ramifications, how can the tax be best avoided on bringing company stock outside of a company 401(k) plan?
Permalink Submitted by Alan - IRA critic on Wed, 2021-03-24 14:06
You can simply roll over the 401k to an IRA and there is no current tax due. Or if the shares have appreciated enough you could do a qualified lump sum distribution for NUA purposes. You would owe ordinary tax on the cost basis, and then when you sell the shares the amount of appreciation (NUA) would be taxed at the lower LT cap gain rate. A qualified LSD requires that the entire remaining balance of the 401k and similar plans be distributed in the same year as the company shares.