NUA on privately held stock
Good morning,
We have a new client that has company stock in his 401k, but the company is privately held. Can we still utilize NUA? Any IRS code references would be appreciated.
Thank you.
Good morning,
We have a new client that has company stock in his 401k, but the company is privately held. Can we still utilize NUA? Any IRS code references would be appreciated.
Thank you.
Permalink Submitted by Alan Spross on Mon, 2009-09-21 19:34
Following is a copy of IRS Code Section 402(e)(4)E) describing applicable employer stock for NUA purposes:
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E) Definitions relating to securities
For purposes of this paragraph –
(i) Securities
The term “securities” means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form.
(ii) Securities of the employer
The term “securities of the employer corporation” includes securities of a parent or subsidiary corporation (as defined in subsections (e) and (f) of section 424) of the employer corporation.
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And here is the definition of a registered stock:
http://www.yourdictionary.com/finance/registered-stock
Permalink Submitted by Jamie Halverson on Tue, 2009-09-22 16:48
Follow up question, it appears that NUA is available on privately held stock. How would we logistically complete the process? I presume that we liquidate the holdings within the plan, transfer out to an individual acocunt and purchase a similar stock to hold for one year?
Thank you.
Permalink Submitted by Alan Spross on Tue, 2009-09-22 17:50
No, that would not work, nor would buying similar shares.
The sale must be made by the employee after distribution from the plan. If the shares are restricted as to ownership, there would have to be an agreement in place for the distribution to be followed by a re purchase of the shares by a qualified owner. There is no waiting period for this to happen, it could be done concurrently with distribution. The LT cap gain rate applies in this cases without a holding period. For gains in excess of the value at distribution, the one year holding period applies only to those additional gains.