How to calculate stock cost base in LSD NUA distribution
My 401k has appreciated company stocks. I plan to distribute all stocks in my 401k to an outside taxable account by using NUA rule. In my 401k, I have before tax account and after tax account. Do I pay tax on stock costs of both before and after tax accounts if I distribute all of them ? or only pay tax on stock cost in before tax account (not after tax account) ? Thanks.
Permalink Submitted by Alan Spross on Mon, 2012-09-17 23:33
Basis in your plan from after tax contributions can be used to reduce the cost basis on NUA stock. However, the plan accounting may come into play here so you will have to check to see how much of this basis is assigned to company stock.
To utilize NUA, you must take a qualified lump sum distribution of your entire balance in retirement plans of similar kind for this employer. The plan might assign some of the basis to the non company stock assets, and that would leave less basis for the NUA shares. The taxable amount shown in Box 2a of the 1099R issued for the shares distribution will be your taxable portion of the cost basis.
Permalink Submitted by Cima Locert on Tue, 2012-09-18 00:09
Ok, thanks, I’ll check on that.