Don’t think NUA Treatment Makes Sense Here
Client is younger than 59 1/2 and has household income of $150K. We’re rolling over his 401(k) that holds $51K in company stock with a basis of about $15.5K. After he pays the 10% penalty and capital gains tax plus state tax, I don’t see that it make sense for him. Am I missing something?
Permalink Submitted by Alan - IRA critic on Thu, 2016-10-20 23:46
Probably useful only if client needs this money for expenses within the next year or two. Note that the early withdrawal penalty on the cost basis would not apply if the client separated from service at 55 or later. Client would not owe the cap gains tax until the shares were sold, but if he needs this money soon he will save by paying the lower LT cap gain tax on the 70% that is NUA than ordinary income taxes (and perhaps penalty) on the entire amount or even from other parts of the plan that were rolled to an IRA.