That is a Roth conversion and is totally taxable as ordinary income at your margional tax rate.
You can also just roll the 401(k) into a Traditional IRA tax free and then convert a part of the Traditional IRA to a Roth each year to spread the tax burden over several years.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
