RMD and NUA
In reference to a post from Aug 15, 2019 “USING NUA FOR AN RMD – 3 STEPS”
My client turned 72 in May and has not taken her RMD. She qualifies for NUA because she has not taken any plan distributions since leaving her company.
Her RMD for 2022 is $34,444. Her cost basis in company stock is roughly $21,000. According to the above-referenced article the steps are as follows:
Step 1: Distribute $34,444 of company stock to the brokerage account to satisfy 2022 RMD.
Step 2: Do a rollover of all non-NUA investments to the IRA.
Step 3: Move the remaining NUA stock to the brokerage account
Question about this.
Is the $21,000 of cost basis the only part of the RMD that is taxable or is the entire RMD taxable?
Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2022-06-14 15:33
Permalink Submitted by Ed Snyder on Tue, 2022-06-14 16:30
Combining steps 1 and 3 makes sense to me. But why does the post I referenced say that they need to be done separately?
Permalink Submitted by David Mertz on Tue, 2022-06-14 17:35
It seems that the 3-step approach is intended to ensure that there is no mandatory 20% tax withholding with respect to the NUA shares. However, separate steps 1 and 3 should not be necessary if the plan will distribute just NUA shares in the first step, which should be possible without forcing out additional amounts for tax withholding. When only employer stock shares are distributed, no tax withholding is required. (CFR 31.3405(c)-1 Q&A-11)