from a Company Plan
Articles
Should You Put
Your Family Member
on the Payroll?
Accounting for
Computer Software
Costs
Nonqualified Plans
for Top Execs
Sections
Sponsor
How Much Is Taxable? When you receive the stock as part of a lump-sum payout from the plan, the stock's current value won't necessarily determine the amount that's taxable to you. Under a special rule, you won't be taxed right away on any increase in value that occurred between the time the plan acquired the stock and the time it was distributed to you.
Example. When company stock was allocated to your plan account, it was worth $10,000. It was worth $30,000 when it was distributed to you. Your taxable distribution is $10,000.
If You Sell the Stock. If you later sell the stock, any capital gain will be figured by comparing the selling price to the price used in figuring the taxable distribution.
Example. After receiving the stock, you decide to sell it for $35,000. Your capital gain on the sale is $25,000 ($35,000 selling price minus $10,000 taxable distribution).
Regardless of how long the plan held the stock, gain attributable to the unrealized appreciation at the time of distribution ($20,000 in the example) qualifies for the low 20% long-term rate (10% in a 15% bracket). Your tax rate on the rest of the gain will depend on how long you held the stock before selling.
