Partial NUA
In January 2017 I will retire from Humana. I have a large portion in company stock that has greatly appreciated. I am planning to move most of the company stock to a taxable account (i.e. $400,000). I will rollover $100,000 of the company stock to IRA. I have made an assumption that my cost basis will be $100,000 in January 2017. Do I have to pay ordinary taxes on the $100,000 in 2017 or can I wait till I sell some or all of the company stock in the IRA account ?
I have read conflicting information on this topic. Most say I have to pay ordinary taxes in 2017. Thanks for your time.
Permalink Submitted by Alan - IRA critic on Thu, 2015-03-12 18:51
You expect to have 500,000 in company stock with as assumed cost basis of 100,000, which is 20%. Only 400.000 will be distributed to a brokerage account and those shares will have a basis of 80,000 (20%). You will report 80,000 as ordinary income in 2017, but will only owe the penalty if your retirement is prior to the year you will reach 55. There is 320,000 of expected NUA in the shares that will be taxed at the LT cap gain rates in the year that the shares are sold. The shares rolled to an IRA will not result in any current tax and NUA will not apply to those shares.