Ive heard there are some unusual estate planning pitfalls with “company stock.” What are they?
IRS Revenue Ruling #75-125 states that the “net unrealized appreciation” NUA (at time of distribution) is “income in respect to the decedent,” and is subject to the long term capital gains tax to the heirs, just like any other pension benefit not yet taxed to the deceased. That’s why the August 16, 1999 issue of Fortune, Page 120, had this to say regarding company stock in a 401(k): “One consideration: If you never sell those shares, your hiers wind up owing capital gains on the appreciation going all the way to thier value when they originally came into your possession. That’s a lot more than they’ll owe on the other stock they inherit, which is only taxed on the appreciation since your death. If you have a choice, then, sell your company stock to meet retirement expenses and leave other assets to the kids.
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