NUA and stepped basis

Submitted by abraham boznick on Sun, 2018-02-11 07:20

Normally NUA held stocks (after they were distributed from 401k account) do not get stepped basis when the holder of the account dies. However, if NUA stock is gifted to another person and this person dies while holding this NUA transferred stock — would the stock get stepped up basis? How does a brokerage account keep track of the NUA stocks for determination that there is or there is no stepped up basis for the NUA held stocks (especially if the stock gets transferred between different brokerage firms)? thank you



Submitted by Alan - IRA critic on Sun, 2018-02-11 17:23

  • If the shares have gained after the plan distribution, and the NUA per share is .50 and the additional gain is .10 at the time of the gift but .20 when the donee passes, the recipient of the shares will get a stepped up basis to the full FMV of the shares at donee’s death less .50. The shares retain the NUA regardless of gifts and deaths and there is no basis adjustment on the NUA portion. 
  • If the shares have dropped .30 after distribution, the NUA is reduced to .20. In this scenario the recipient of the shares after donee’s death would have a basis equal to the FMV less .20.
  • Brokerages should accept client statements of basis for inherited shares, NUA shares and gifted shares and enter this data into their reporting systems. They may not have a specific way to deal with NUA separate from other LT cap gains on the 1099B, so sellers may have to carefully check the 1099B for accuracy and override some of them using the recommended procedures. If the holding broker has the correct info, updated for any DOD adjustments, they should transfer it to succeeding brokers. Not sure if all brokers systems are equipped to incorporate all data transferred to them in complex situations.

Add new comment

Log in or register to post comments