NUA from ESOP - 1099 Question - Ed Slott and Company, LLC

Submitted by John Michael Hall on Wed, 2021-02-24 16:03

I am helping a client with a lump sum distribution from an ESOP. The client can benefit from NUA, so I am trying to help him through it. The account value is $162K, with $30K basis. Schwab has indicated that the 1099 will read as follows:

Gross Amount Box 1: $162,000
Taxable Amount – Box 2A : $30,000
Capital Gain – Box 3: No input
NUA – Box 6: $132,000

Does this seem right? Does the Box 6 NUA input confirm his eligibility for NUA as long as we follow the rules (lump sum this year, etc.)?

Thanks!

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Permalink Submitted by Alan - IRA critic on Wed, 2021-02-24 16:50

Yes, the 1099R is correct. It should also have the “total distribution” box checked. Box 7 could be either 1,2, or 7. Code 1 suggests age under 59.5 with separation from the plan sponsor prior to age 55, and in that case the 30,000 taxable amount would be subject to penalty.

Permalink Submitted by Grettis Grettis on Thu, 2021-02-25 13:14

Quote:

I am helping a client with a lump sum distribution from an ESOP. The client can benefit from NUA, so I am trying to help him through it. The account value is $162K, with $30K basis. Schwab has indicated that the 1099 will read as follows:Gross Amount Box 1: $162,000 Taxable Amount – Box 2A : $30,000 Capital Gain – Box 3: No input NUA – Box 6: $132,000Does this seem right? Does the Box 6 NUA input confirm his eligibility for NUA as long as we follow the rules (lump sum this year, etc.)?Thanks!

how is the situation now?

Permalink Submitted by Alan - IRA critic on Thu, 2021-02-25 13:55

Response posted above.