Thank you for the details.
My answer will be based on the information given, and the assumption that you are moving eventually to NH as stated in the original question. I will address a peculiar issue regarding California and residency.
As previously stated, with regard to the fedearl return. You would have to talk to he IRA adminstrator. Normally, this is a representative of the bank or institution it is in. Generally, they will withhold, by law, the estimated taxes on the early withdrawal, including penalty, unless you desigate it as a rollover before hand. Even then that will only avoid the withholding of the penalty. There are some who may agree, that if you are designating the withdrawal as a rollover before hand, to allow you to singn a statement attesting that you are responsible for any taxes, and ensuring you are aware of the 60 day rollover rule. I can tell you that if you money is in a credit union manged account, then they will only waive the withholding of penalties under these circumstances.
The 10 percent capital gains tax rule no longer exists. The rules for capital gains have changed since then.
Now the rules are for capital gains are:
Long term gains: the rates vary by which investment you have. You never told me what you were investing in. But it really does not matter for you, since you will be holding your investments for less than a year, they will be short term.
FOR SHORT TERM GAINS: Your income level will not matter, because it is always taxed at the rate as determined by your adjusted gross income. BUT here is the catch. The 900,000 capital gain, will be added to your adjusted gross income. so even if you had zero earned income from any source (including unemployment, intrest, etc), you will add 900,000 to your gross income of zero, and that will give you an adjusted gross income of 900,000 which will be taxed at 35%.
Now about California: California considers all residents to be residents when they move away, in some cases, unless they break all ties to california. YOu have to be strong in your signal to california that you intend to establish your residence else where, and that you do not intend on returning to California. This is the only state, in my experience, that does this.
Also, if the IRA is in a California Bank, and you withdraw it, it is California sourced income. California will want to buy it. The general rule on intangibles does not apply to IRA's which would be a california sourced income. (if the IRA was in a California Bank or Financial Institution)
To avoid these kinds of issues, and being in a situation of having to do battle with california, I recommend creating your rollover account in your destination state.
REGARDING YOUR STOCKS: If you hold on to them for more than a year, the long term gain will be 0% if you continue to have a zero gross income. This is because the rules for long term gains is different than the rules for short term gains. (if you sell these in the year of the short term gain you are proposing, you will have to pay capital gains at 15% on the long term stocks). You have to hold the stocks for one year and one day to be eligible for long term capital gains treatment.
The new zero rate is for tax years from 2008 to 2010; it expires in 2010.