NUA
This question is for anyone: How is the tax treated on NUA? If cost is say 100m on date of dist. and now value is less than that even after one year, is there any tax to pay if stock is sold?
This question is for anyone: How is the tax treated on NUA? If cost is say 100m on date of dist. and now value is less than that even after one year, is there any tax to pay if stock is sold?
Permalink Submitted by Alan Spross on Thu, 2008-09-25 20:43
No tax to pay. The NUA has been totally eliminated by market forces, and the cost basis per share would then exceed the amount realized upon sale. Accordingly, there would be a LT taxable loss for the investment on Sch D.
Permalink Submitted by Mark Kamann on Fri, 2008-09-26 16:50
Alan-oniras,
What about if the stock has not been sold. Say cost is 100m @ date of distribution and now it’s worth 50m would I not have to pay tax on the distribution (100m)? I thought tax always had to be paid on the original cost on the yr is was distributed. The NUA part would be difference between cost and sell value and if L.T. then gain or loss on sch D.
Thx, Mark
Permalink Submitted by Alan Spross on Fri, 2008-09-26 21:17
Yes, you have to pay tax on the cost basis at distribution, but you asked about the tax on the NUA. No one would use NUA if the value was less than the cost at the time of distribution, as there would be NO NUA at the time OR in the future. Therefore, I assumed that distribution had been done and then the value dropped sharply.
On the other hand, if you distributed the shares earlier, and at the time of distribution there was NUA but the stock dropped later, the NUA is temporarily erased, but if the stock recovers, the NUA is also recovered. But for this to occur, there must actually be NUA at the time of distribution. That would show up on your 1099R.
Let’s take this a step further. If you distributed the stock with the 100m cost basis and within 60 days wish you had not done it, you can still roll the shares over to an IRA within 60 days and wipe all your current tax on the cost basis. You will then not be using NUA, but would report this on your 1040 as a rollover.
You would not want to pay ordinary tax on 100,000 up front and then wait for the shares to recover or you would be grossly accelerating your payment of income tax.
This gets a little dicey. What exactly is your situation?