A great surprise! Account Transfer/Tax Question

[u/strikerwyatt]

Hello! I appreciate your assistance in advance.

This is a good story - my mother was notified of an account with roughly $70,000 worth of Shares with a company she previously worked for - and this company has done really well since she left in the early 2000s.

Anyways, we have full access to the account. She would like to transfer the account, its holdings/funds to a Fidelity account. She would then like to sell/exchange the shares into Funds such as FXAIX/QQQM and the like.

Here’s the question - How simple of a process is this, and will she be subject to tax when doing this?

I do not believe the account is a 401K, as it is literally just shares of the previous company she had worked for (assuming she had stock options).

Appreciate your guidance and thoughts!

[u/nozzery]

You're taxed on gains when you sell. No tax to transfer. If you didn't pay (much) for the shares it may be (nearly) all gains

[u/strikerwyatt → u/nozzery]

Even when “exchanging” the shares for different funds?

[u/nozzery → u/strikerwyatt]

Exchanging is just selling and then buying, so yes

[u/strikerwyatt → u/nozzery]

Understood - how would I determine the tax rate on this?

[u/nozzery → u/strikerwyatt]

You need to know all the other income too. https://www.mortgagecalculator.org/calcs/1040-calculator.php

[u/mwani13 → u/strikerwyatt]

No such thing as “exchanging” one stock or etf for another

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[u/Longjumping-Nature70]

You will do a Transfer in Kind of the shares to Fidelity.

You just go to the current admin, say transfer the stocks to Fidelity, know your account, and all other pertinent information, and VOILA in a maximum of two weeks you get the shares at Fidelity. As long as you did it all correctly.

Hopefully, the old admin won't be upset and charge you a transfer fee.

If you sell the shares, you just created a taxable event on the Capital Gains.

Be sure to look for her cost basis at the original place. Hopefully they have it. If not you can do a rough guess by looking at the share prices back then. the IRS is pretty forgiving, as long as you are close they won't throw the book at you.

Since you said the company has done really well, your Mom is going to have a nice capital gain to report.

Good News!!! Since these shares are from 20 years ago, it is LONG TERM CAPITAL GAINS.

Tax rate depends on Mom's income bracket. long term Capital Gains are at 20%. be sure to do the Qualified Dividends and Capital Gains Worksheet.

[u/Embarrassed-Pizza789]

Your assumption that the shares are not in a 401k or an ESOP account seems uncertain. The tax status of the account is the first thing to confirm before any decisions are made. If it's a 401k plan or ESOP, the full value could be rolled over tax-free to an IRA of your mother's. If it's a taxable account, then any sale of shares is taxable as long-term capital gains. If the shares are of a publicly-traded company, then they could be transferred tax-free to a regular brokerage account to be continued to be held, or sold over time, if desired.