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I am investigating the options for what to do with an Employee Share Purchase plan upon retirement that do not result in having to pay a big tax to IRS. I understand that I will have a taxable event if I take constructive receipt of the shares but I believe I can also transfer them to a 401k or some other type of arms length plan..... Looking for some detailed information on choices.

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    To my understanding ESPP exist outside of retirement plans. So there isn't a way to avoid the taxable event. If you have access to your plan documentation, you should quote relevant parts, or describe your ESPP in more detail. Jul 31, 2020 at 18:17
  • How are you defining "big tax"? Have you already bought shares and just wanting to avoid paying tax on selling them? The only thing you'd pay tax on is the gain from the time you bought them - the discount you received when buying them should have been taxed as income at that time.
    – D Stanley
    Dec 28, 2020 at 22:07

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ESPP are typically bought at a discount, the discount is taxed as ordinary income. The remaining gains are taxed as long term cap gains when held for over 2 years. Depending on your income during retirement, that can be 0%, up to 15% maximum. That’s not too bad.

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  • This answer is very incomplete. Shares are taxed as long term capital gains after 1 year, not 2. Two years are the point where sale becomes a qualifying disposition as opposed to a disqualifying disposition (which this answer does not attempt to distinguish between). You also don't mention when the 2 years start (hint: not when the shares are purchased)
    – Daniel
    Aug 31, 2020 at 0:47
  • If you post a complete, accurate answer, I’d gladly delete mine. I retired in 2012, and have clearly forgotten the full details of ESPP. Aug 31, 2020 at 0:51

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