Author Topic: Special treatment for company stock held in 401(k)?  (Read 1529 times)

Gone Fishing

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Special treatment for company stock held in 401(k)?
« on: December 31, 2014, 02:10:16 PM »
http://www.investopedia.com/articles/retirement/05/062305.asp

I have never heard of such a thing.  Has anyone successfully done this?  Looks to me like a big loophole set up for highly compensated executives.

ShoulderThingThatGoesUp

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Re: Special treatment for company stock held in 401(k)?
« Reply #1 on: December 31, 2014, 02:24:07 PM »
Am I reading it correctly that if you quit, take the stock out of your 401(k), you only pay taxes on the cost basis?

Doesn't matter for me, since I work for a private company and am not allowed to sell my company's stock until I quit. (They only match in company stock...)

Gone Fishing

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Re: Special treatment for company stock held in 401(k)?
« Reply #2 on: December 31, 2014, 02:33:11 PM »
Am I reading it correctly that if you quit, take the stock out of your 401(k), you only pay taxes on the cost basis?


Yes, ordinary income tax rates on the cost basis, until you sell it, then you would only pay capital gains rates on the appreciation, vs ordinary income rates you would have had to pay on the entire amount if it was anything else.

Gone Fishing

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Re: Special treatment for company stock held in 401(k)?
« Reply #3 on: December 31, 2014, 02:57:17 PM »
This is definitely not just for executives. Anybody who works for a publicly-traded company and has a 401(k) plan that allows holding that stock inside the plan can potentially make use of this. For starters, that's most public engineering companies.

Note that a concentrated position in your own company may not be wise.

Good point, I was just trying to understand the motive behind the "loop hole".