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Money Matters: Net Unrealized Appreciation

Money Matters

What is net unrealized appreciation?

What it amounts to is when you work for a company and you have 401k and company stock in that 401k. Generally when someone retires they transfer their 401k into an IRA.

Now when they go to take money out of that IRA it's going to be taxed what ever that bracket is. It could be taxed as high as 39.6% what the net unrealized appreciation rule let's you do is you can take the company stock and instead of going to an IRA you transfer your whole 401k into a non qualified account.

Now a company stock is going to have two components to it. It's going to have the bases which you paid for and its going to have the appreciation.

So if you take that out they're going to tax you on what your bases is. Now if it goes into a non qualified account later if you sell that stock your going to be taxed on a taxable gains rate instead of current income.

So there's a tax player.

It can be and it's really not for everyone and not everyone has company stock inside their 401k or the ability to get it either.

But it's something often over looked and it can be a very good technique for the right person.

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