In-Kind ESOP stock distributions for NUA
Do in-kind stock distributions from an ESOP have to be in a taxable brokerage account to qualify for NUA or can I just take physical possession of the physical stock certificates and still qualify? Also are there any specific IRS forms to file when taking a partial distribution from the ESOP at separation?
Permalink Submitted by Alan - IRA critic on Mon, 2016-08-01 19:24
The shares do not have to be held in a brokerage account, but that is the most convenient place for them. There will be a 1099R with a Box 2a and 6 amount, and you report on line 16 of Form 1040.
Permalink Submitted by Leo Nunez on Mon, 2016-08-01 20:04
Thanks again. That is what I thought but wanted to double check.
Permalink Submitted by [email protected] on Tue, 2016-08-02 14:43
NUA is only available as part of a Lump Sum Distribution. OP mentioned partial distribution upon separation.
Permalink Submitted by Alan - IRA critic on Tue, 2016-08-02 16:06
Yes, a lump sum distribution must be completed by the end of the year to utilize NUA on company shares distributed that year. However, a partial distribution in the LSD year can be done prior to the LSD or a partial distribution of the ESOP shares where the rest of them are rolled to an IRA or Roth IRA as part of the LSD. There is also a very limited version of NUA available in cases where there is no LSD. OP should recheck the distribution planned with respect to NUA.