NUA of stock with unknown basis
Thanks all, in advance, for your help. I have a client who owns publicly traded stock that he purchased, and was granted to him, all custodied in the 401-k. How do you arrive at a basis for 1) [u][u]basis-less stock [/u][/u](grants), and 2) other shares he purchased regarding which he does not know the basis (but can guestimate)?————- Also, do you have to hold the shares for one year once you take the distribtion for the shares to be consider LT? Albert Israel, Seattle
Permalink Submitted by Alan Spross on Mon, 2007-10-29 20:16
Albert,
The plan administrator must provide the cost basis, which is the cost of shares when acquired by the plan. You did not mention “employer” shares, but NUA is only available on employer shares or companies spun off by the employer in the plan. Other publicly traded shares that the employee acquired in a plan with a brokerage platform are not eligible for NUA. For NUA shares, the amount of NUA will show on the 1099R, so an employee estimate cannot be used.
Once eligible for the lump sum distribution that must be done to utilize NUA, the NUA gains are long term even if sold the first day in the taxable account. For additional gains in excess of the value when distributed from the plan, the one year plus one day holding period applies to qualify for the LT rates.