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.