Gifting of Stock Containing NUA
I believe I understand the federal tax treatment on company stock that I take from a company plan “in-kind” in a lump sum distribution at or after retirement. For example, I pay tax at the ordinary income tax rate on the stock’s cost basis. Then, if I sell the stock within one year of the LSD, I pay tax at the LTCG rate for all NUA, and tax at the ordinary income tax rate on any appreciation that may have occurred after the LSD.
Now my question based on the above example: If I gift some this stock “in-kind” to a charitable organization (within one year of the LSD), will my gift be considered 1) “ordinary income tax property” meaning that I can only deduct the cost basis on my tax return, or 2) “capital gain property” meaning that I can deduct the fair market value of the stock at the time the gift was given, or 3) a combination of 1 & 2 allowing me to deduct only the FMV of the stock at the time of the LSD, or 4) none of the above? If the answer is (4), what WOULD I be allowed to deduct on my tax return? Thanks in advance for your response!
Permalink Submitted by Alan Spross on Thu, 2007-09-06 05:31
I really do not know the answer, it is not evident from the code sections I accessed. My guess would be that since the asset has both a cap gain and ordinary income component, that some combination would apply.
However, after calculating the deduction up through the NUA as cap gain property, perhaps there would not be another deduction for the ordinary income part because the cost basis has already been included in the cap gain portion. Then there’s the issue with all the % limitations for the various donated property.