Net Unrealized Appreciation
This is my first time coming across this in ages. My client has AMZN company stock in his 401k. He is now eligible to roll it over to an IRA, but the rep pointed out he owns $ 24,754 worth of AMZN with a basis of $ 4,863. He said we should consider NUA before rolling it over.
My understanding of the rules is that the entire plan has to be distributed this year. $ 405,000 in the plan. $ 380,000 gets rolled over to an IRA, and we distribute the AMZN to a brokerage account. I believe the brokerage account can only hold this stock and cash, it can’t hold other ETFs and mutual funds. He will get a 1099-r for $ 4,863 and that will be included as income for this year. Then any future gains will be taxed as capital gains.
Is this correct or have I missed something?
Permalink Submitted by Alan - IRA critic on Fri, 2023-01-27 18:40
Largely correct, except that the NUA shares can be rolled into an existing taxable brokerage account and held along with other investments. Gains in addition to the share value at distribution will be taxed at the ST rate if sold within the first year, LT after 1 year.