NUA for SURVIVING SPOUSE
An employee with an ESOP with company stock along with a 401k has died. His spouse is under 55. If she takes the company stock from the ESOP using the NUA rules, will she be paying a 10% penalty due to her age along with ordinary income tax on the cost basis?
Any way to work around the penalty other than rolling it to an IRA?
Permalink Submitted by Alan Spross on Fri, 2008-04-25 20:38
There should be no early withdrawal penalty, since the 1099R should be coded with a “4” to indicate a death benefit. She would only owe ordinary income tax on the cost basis. There should also be no years with intervening distributions after his death and prior to the lump sum distribution.