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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29774
Experience:  Taxes, Immigration, Labor Relations
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It turns out that the cost basis of the company stock within

Resolved Question:

It turns out that the cost basis of the company stock within the 401K is $116,000. The stock value is $257,000. No other adjustments to the previuos scenario. Please re-calculate my estimated 2012 Federal Income Tax liability assuming that I distribute the stock from my 401K to my traditional IRA, and then sell it one month later. Thank you.
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.
Hi and welcome to Just Answer!

There is no problem - I will re-evaluate your situation if needed.
Following are included into your adjusted gross income:
--$28,800 disability social security income - 85% taxable $28800*85%=$24480
--$20,000 withdrawal from Traditional IRA - taxable
--$116,000 represents the basis of the company stock from the 401K Plan - taxable
--$12,000 Rental Income - assuming that is NET rental income (after deductions).
Total adjusted gross income - $176,800

Assuming Married Filing Jointly, Standard deductions, no dependents, no other deductions or credits. Assuming your spouse's income is also included above.
Your estimated tax liability would be ~$32,200.

Please be aware that to be eligible for the capital gain treatment - the stock should be distributed and sold in the regular investment account - not in the IRA account.
If sold within the IRA account and distributed thereafter - the distributed amount will be treated as a regular retirement income.

Let me know if you need any help.
Lev and other Tax Specialists are ready to help you