NUA
I have a client, age 62 & still working, who had $1,000,000.00 within a Profit Sharing account. Over $ 100,000.00 was company stock with a cost basis of $ 20,000.00. At the advise of his CPA, he ” Transferred in Kind ” the stock to a NQ Brokerage Account on November 15, 2013. The $ 900,000.00 + balance was left within the Profit Sharing account.
I was under the assumption that to qualify as a lump-sum distribution for the NUA tax break, the distribution must occur in one tax year and that the participant’s account balance must be zero by the end of that year.
What, if any, are the tax implications here?
Permalink Submitted by Alan - IRA critic on Thu, 2014-05-08 17:14
You are correct, there should have been a qualified LSD completed before year end 2013. What does his 1099R look like with respect to Box 2a, 5 and 6? And I assume the total distribution box is not checked. There is a watered down version of NUA described on p 16 of Pub 575 for those not completing an LSD, and the 1099R would be expected to show a much lower amount of NUA than the 80k for a qualified LSD.
Permalink Submitted by Richard Ernst on Thu, 2014-05-08 18:26
That still left $ 900,000.00 inside the 401(k). I thought for a plan to qualify as a LSD, “ALL” plan funds AND company stock must be withdrawn.
Permalink Submitted by Alan - IRA critic on Thu, 2014-05-08 22:18
Note my prior post regarding a watered down version of NUA that might be possible without a qualified LSD. But I need to know what his 1099R indicates to determine if this is a possibility or not. Again, this compromised NUA falls far short of the commonly recognized full NUA option with a qualified LSD. This is referred to on p 6 of this explanation: https://www.edwardjones.com/groups/ejw_content/@ejw/documents/web_content/web234701.pdf