Net unrealized apprecition and exchange funds
I understand that nua shares do not get a step up in basis at death of owner. If those shares are deposited to an exchange fund would the resulting shares purchased with those nua shares also not get a step up in basis at death?
Permalink Submitted by Alan - IRA critic on Sat, 2022-08-27 15:47
After your lump sum distribution of employer shares, you cannot reinvest them in another investment such as an ETF without selling the shares. When you sell the shares, the NUA will be taxed at the lower LTCG rate, and you will no longer have shares with NUA. The ETF you reinvested in will get a full basis step up upon your death. Instead, if you hold the NUA shares as distributed and then pass, there will be no basis adjustment on the NUA portion, but there will be a basis adjustment on any subsequent gains after distribution from the plan. Your heir would only owe cap gain tax upon sale of the shares for the inherited NUA per share.
Permalink Submitted by Dean Packard on Sun, 2022-08-28 13:53
I get the confusion. I was not asking about status if I invested in an ETF. I was referring to a type of partnership referred to as an exchange fund. Offered by private placement memorandem by firms like Eaton Vance and Goldman Sachs. Does anyone have any insight into how those retain the inability to step up basis if funded with nua shares?
Permalink Submitted by Alan - IRA critic on Mon, 2022-08-29 01:48
I would guess that when NUA shares are contributed to a pooled fund in exchange for shares of the diversified pooled investment, that the shares lose their NUA status. If pooled shares are inherited, they should therefore receive a full basis adjustment. It’s less clear what your basis will be if you sell pooled shares. It is not clear how these funds track or report your basis or what the IRS expects to see reported on your 8949 if you sell pooled shares.