common stock fund nua
Would you confirm that you cannot cherry pick the lowest basis shares when the company stock is held in a fund? I’m looking at NUA for a client and some shares are in the ESOP (low basis), but a larger portion of their stock (~$450k) is held in the common stock fund with a basis around 60% of the value. If we cannot choose the shares for NUA in the common stock fund, wouldn’t it make sense to roll the common stock shares to an IRA and not utilize NUA?
Permalink Submitted by Alan - IRA critic on Fri, 2019-05-10 23:22
Yes, 60% of FMV is way too high unless client needs to raise cash by selling all the shares right away. The stock fund is probably not acceptable to an IRA custodian for rollover, so if the company will verify that if you distribute the ESOP shares only for NUA, that they will calculate the 1099R cost basis (Box 2a) using just the ESOP shares cost basis. The other high basis stock fund shares can be addressed by selling within the 401k and then rolling the proceeds over to an IRA as part of the LSD. In other words, client needs to be sure that the plan accounting separates the ESOP shares from the others for purposes of NUA cost basis determination.