Citi Benefits Handbook
Tax Rules for Common Stock
Upon certain events, if you choose to receive a distribution of stock (instead of cash or instead of rolling over your payment) for the value of your contributions and any employer contributions that are invested in the Citigroup Common Stock Fund or State Street Common Stock Fund, any net unrealized appreciation in the value of such stock while held by the Plan's Trust that would be taxable at the time of distribution is, instead, taxable at the time of disposition, i.e., when you sell the stock. However, you may elect on your tax return for the taxable year of the distribution to treat this appreciation as current income.
In order for this special treatment to apply to both your contributions and employer contributions in the Citigroup Common Stock Fund or State Street Common Stock Fund, you must receive a distribution in a lump sum that meets the following criteria.
In general, a lump-sum distribution for this purpose is the distribution of your entire balance (within a single tax year) from the Plan due to:
If the distribution is not a lump-sum distribution as defined above, tax is deferred only on the net unrealized appreciation resulting from your own after-tax contributions to the Plan.
The "net unrealized appreciation" is the excess of the market value of the stock at the time of the distribution over the cost or other basis in the stock to the Trust. For additional limitations and information about the taxability of State Street stock, see "State Street Stock".
Any taxable appreciation on shares of common stock not taxed to you at the time of distribution generally will be taxed as a long-term capital gain upon subsequent disposition of the stock.
Any additional gain you realize, on a subsequent taxable disposition, that exceeds the original net unrealized appreciation is taxable as either short-term or long-term capital gain depending on the stock holding period.
If the value of a lump-sum distribution of common stock is less than the total of your regular after-tax contributions or Roth After-Tax Contributions (if any), no loss is recognized at the time of distribution, and the basis of such common stock would be the amount of your contributions. You recognize a gain or loss only when you subsequently sell the securities.
The balance of the value of your account in excess of the aggregate of your contributions and the net unrealized appreciation on stock will be taxed as ordinary income when paid to you unless rolled over to an eligible retirement plan. This includes all contributions other than after-tax and Roth After-Tax Contributions and all investment growth on your account (other than certain growth on Roth After-Tax Contributions).
Tax laws change from time to time, and the tax impact of receiving payments from the Plan will vary with your individual situation and when you receive the distribution. Because the Company does not give tax advice or counsel, you should consult a professional tax adviser or financial expert for advice about your circumstances.