Quick Read – Selling $1.36 million in embedded gains all in one year triggers the 20% federal LTCG rate, 3.8% NIIT, and state taxes, representing a swing of over $400,000 compared to smarter paths. – Spreading sales across four retirement years keeps most gains in the 15%…
deral bracket, typically saving six figures in taxes versus a single-year liquidation. – The NUA election lets 401(k)-held employer stock’s $1.36 million in appreciation be taxed at long-term capital gains rates instead of ordinary income rates, provided the mechanics are executed correctly. – A 64-year-old software executive walks out of the office on her last day with $1.6 million sitting in a single employer stock. Her cost basis is $240,000, meaning roughly $1.36 million is embedded long-term capital gain waiting to be triggered
She has no W-2 income starting next January, a paid-off house, and a 401(k) she has not touched. The real question is how to unwind the position without handing the IRS, her state, and Medicare a tax bill that could swing by more than $400,000 depending on the path she picks. This situation is common in late-career tech, finance, and pharma.
Concentrated stock built through grants, options, and an employee stock purchase plan can become the largest line item on the balance sheet. SEC filings show executives at Coca-Cola (NYSE:KO), Seagate Technology (NASDAQ:STX), and Republic Services (NYSE:RSG) unwinding positions through Rule 10b5-1 plans and option exercises. Done poorly, the tax drag can erase a decade of compounding.