NUA

Submitted by ShipsnGiggles on Wed, 2013-03-06 13:38

Good Morning

Could someone pleas assist with an NUA question.

Thank you in advance

I am aware of the spcial NUA tax treatment (shares are sold at LTCG rates) upon rolling company stock a taxable brokerage account (in lieu of an IRA).

Questions?
What is the tax treatment if the account owner doesn’t sell the shares and subsquently dies?
Do the beneficiaries receive a step-up in basis?
Do the beneficiaries receive the same LTCG treatment?



Submitted by Alan - IRA critic on Wed, 2013-03-06 21:38

  • The beneficiaries of the decedent receive the same NUA treatment as the decedent would have. There is no DOD basis adjustment on the NUA per share, although there is for any increased value per share gained after the original LSD before participant’s death. There could also be additional gains in the hands of the beneficiary, which are taxed LT only if held by beneficiary over a year before selling. Beneficiary could have several different tax treatments depending on share value gains and losses and when they occur.
  • Assume original cost basis of 20/share and NUA of 80/share when distributed and reflected on the 1099R. Shares increase to 115 per share at participants death. When beneficiary sells after 8 months, the shares are valued at 107. Beneficiary would have a LT gain of 80 (NUA) and a LT loss of 8 (Cost 35, Realized 27). Form 8949 entries will require explanatory statements.
  • On the other hand, if share value is under 100 when participant passes and beneficiary sells at under 100, the amount of NUA taxed is reduced by the loss of value. There is no tax on NUA that no longer exists.

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