Choosing a Route for Your Company Stock.

Kiplinger's Retirement Report, July, 2007

YOU'VE PROBABLY already heard about a tax break called net unrealized appreciation. It's often promoted as a great deal for anyone with appreciated company stock in a 401(k). But it's not right for everyone.

Although it sounds convoluted, the concept is simple. Let's say over the past few years you paid $20,000 in pretax dollars for your company's stock for your 401(k). Now you're about to retire, and the shares are worth $50,000. The $30,000 in increased value is the net unrealized appreciation, or NUA.

If you roll the employer stock along with your other assets into an IRA, you'll owe no income tax now, but that appreciation--along with all other IRA withdrawals--will be taxed in your top tax bracket, as high as 35%. If instead you split off the...

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