NUA and 60 day rollover of basis
If a client has taken a lump sum distribution from their 401k plan and using the NUA strategy on the stock, can they rollover enough shares of the stock equal to the basis into an IRA within 60 days AND -0- out the current tax (ordinary income) on the basis?
Permalink Submitted by Alan Spross on Wed, 2010-12-15 19:26
No. While a client does have the option to roll over any or all of the shares within 60 days of receipt, they must assign NUA cost basis on an average per share amount. Eg, if their cost basis is 20% of the FMV, if they roll over 20% of the shares, their taxable basis is reduced by 20%. They cannot assign all the basis to a reduced number of shares.
They also cannot sell the shares and report LT cap gain and roll the proceeds over to a Roth IRA. Once they apply NUA to any share, a rollover of any of the proceeds from the sale is not allowed.