Changing your mind on NUA – 60 Day Rollover

Submitted by Andy Bunch on Thu, 2022-06-30 01:13

If an individual transferred shares of stock from their 401k to a taxable brokerage account, and then changed their mind and wanted to undo the NUA and make it a rollover IRA within the 60 Day window, are there any potential issues? The shares are in a publicly traded company and they went down in value a little bit from the price at distribution (but still well above the cost basis), could that cause problems like the 10% penalty on the difference? What are the mechanics on the tax return to do this the right way if the values are different but the number of shares are the same? Many thanks for any help.



Submitted by Alan - IRA critic on Thu, 2022-06-30 02:49

  • If the NUA shares are instead rolled over to an IRA, any change in value after the date of distribution is ignored. The rollover is reported as if the value of the shares had not changed in the interim. If the shares dropped in value, which is the most likely situation if someone is reconsidering NUA, the value in the IRA will just be less than the value at distribution. LIkewise, if the shares are sold and the cash received is rolled over to an IRA, while a 1099B will likely be issued, there is no reported gain or loss on the sale of those shares. An explanatory statement would need to be provided for the Form 8949 entry explaining why the cost basis was changed to equal the amount received upon sale.
  • Same rules apply if taxpayer decides to utilize NUA on some of the shares and roll over the rest to an IRA. For the shares retained for NUA, the taxable cost basis would have to be reported, and for the rolled over shares or cash rolled over if the shares were sold, the above reporting would apply.
  • As for each individual share, there is no mix and matching allowed for NUA and a rollover. 
  • As indicated above, since there is no taxable income for rolled over shares, the penalty is not an issue. The penalty would apply to the taxable cost basis on shares utilized for NUA under 59.5 unless the separation from service at 55 exception exempted the penalty.
  • The IRS has not actually issued guidance on exactly how to report the above, but is seems that overiding any cost basis to equal the amount received if the shares were sold is the only way to erase any taxable gain or loss on shares that are actually sold with the cash proceeds rolled over.


Submitted by Andy Bunch on Thu, 2022-06-30 03:47

This is so incredibly helpful – thank you for the thoughtful and quick response!



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