Significant Tax Savings In The Right Situation.
Lowering the tax rate on qualified plan distributions from ordinary income to capital gains.
This situation applies if a qualified plan participant has company stock that has significant unrealized appreciation (a large difference between current market value and the cost basis). The goal, with proper planning, is to convert the gain that would normally be taxed at much higher ordinary income rates to much lower capital gain rates. However, there are significant rules and a specific process must be followed. The key is to do proper planning before a distribution is taken.