Another NUA question
Client works for GE, has substantial GE stock in 401(k).
GE tracks basis on average cost basis, client has records showing what he paid for each block.
Can client withdraw just the lower basis stock to taxable account for NUA purposes, roll the rest to an IRA? Or is client stuck with GE average cost basis for all his shares?
Or, can client withdraw all his stock to taxable account, then roll the higher basis stock to an IRA within 60 days? Will the IRS accept his lower basis records for the NUA stock remaining in taxable account?
Where can I read more about this?
Thank you all for your help.
Art Dicker
Permalink Submitted by Alan Spross on Thu, 2007-09-20 20:08
Art,
Good idea, but I do not think that there is a work around for plan accounting locked into a full average cost for all shares. The 1099R that is issued is going to reflect the plan accounting in the appropriate boxes including the NUA amount. I am not aware of any PLR allowing taxpayer submitted separate accounting to override the 1099R for tax purposes.
Perhaps if the client knows some GE management of means that might have investigated this with the administrators, there is some way to get this done at the plan level. The problem with the client undertaking this himself is that by the time the matter is resolved it is far too late to change the rollover amount, and some of his NUA would be allocated to current year taxable cost basis.
Attached is a link that discusses some related NUA issues, but does not address your main concern, which is a work around for plan accounting. The closest the release comes to this issue is on p 17, where they discuss selling higher cost shares in the plan prior to the LSD.
http://www.fidelityresearchinstitute.com/pdf/nua_may2007.pdf
Permalink Submitted by Arthur Dicker on Thu, 2007-09-20 22:55
Thank you Alan for this informative response and link.
Art