NUA
A client of mine worked at Amazon. His stock has a basis of $ 4,863.66. Instead of rolling over the stock, we chose to take the NUA. His 401k was at Fidelity, but all his investment accounts are at Schwab. Operationally, it was easier to set up a brokerage account at Fidelity, where the rep could move the shares from his 401k to his brokerage account. Then, once the shares and cost basis were added at Fidelity, we moved the shares over in-kind to Schwab. Once my client holds the shares for one year, they will be taxed as a LTCG. My question is what is the start of the holding period? Is it the day the funds left his 401k? The day they landed in his Fidelity brokerage account or the day the shares arrived at Schwab?
Permalink Submitted by Alan - IRA critic on Wed, 2023-03-01 15:13
NUA per share is always taxed at the LTCG rate, even if you sell right away. However, additional gain after distribution of the shares is taxed at the ST rate if you sell in the first year. After one year, the additional gain is also taxed at the LT rate. The holding period for the additional gains starts the day after the shares were distributed by the 401k. Hopefully, Fidelity has captured the correct cost basis for the shares and the NUA per share, as that info will be transferred to Schwab. Client should verify with Schwab that their basis record is correct.
Permalink Submitted by Robert Roselli on Tue, 2023-07-18 21:08
Hi, I got a response to this on March 1st. Now the clients want to sell. If I am following correctly, his basis is $ 4,863.66. The shares were distributed on 2/7/23. That day, the price was $ 102.11 and the value was $ 25,425. Today, the price is $ 132.83 for a value of $ 33,074. If he sold today, is it true that $ 20,562 would be an LTCG ($ 25,425-4,863) and $ 7,649 be an STCG (33,074-25,425)? Then on 2/8/24, all of it is a LTCG?
Permalink Submitted by Robert Roselli on Tue, 2023-07-18 23:22
I am not sure if the AMZN stock derived from stock options, rsu’s, an esop, or outright stock. My understanding is that stock options and RSUs are eligible for NUA. I’ve read in several places that it has to be the actual stock. My questions are:- Is the only exception to holding the actual stock, if someone obtained the stock thru an ESOP, they have to convert it to the actual stock first?- Are RSUs and stock options even able to be held inside of a 401k?- When I went to do the rollover, Fidelity told us about the NUA. Is it necessary for us to call them back and see how our client obtained the shares (actual stock vs ESOP)? One of my colleagues keeps telling me we need to know if the shares were stock options of RSUs. It sounds like neither.As always, I truly appreciate your help and feedback.
Permalink Submitted by Alan - IRA critic on Tue, 2023-07-18 23:22
That’s correct. Client will have to report the sale on Form 8949 and split it into a LT sale and a ST sale to arrive at the correct type of gain. The IRS have not issued guidance on how best to do that, so client will have to adjust the basis figures and proceeds figures accordingly after seeing how the 1099B is issued.
Permalink Submitted by Robert Roselli on Wed, 2023-07-19 09:22
Alan, can you let me about my question on the RSUs and stock options that I asked above?