NUA
Interesting scenario
Client has significantly appreciated publicly traded company stock in both his 401(k) and ESOP. His firm via inversion merged with an overseas firm – He has been informed all shares except for those owned in qualified plans have lost their step-up – is this correct?
Questions:
What basis is used in the situation? How can the client determine if NUA tax treatment is beneficial?
Assuming NUA is beneficial does the client have to liquidate all his assets in both the 401(k) and ESOP. I am aware the IRS requires “balance to the credit” in a lump sum distribution – does that rule apply for all qualified plans of the employer?
Thanks
Permalink Submitted by Alan - IRA critic on Wed, 2015-05-13 17:44
Since the 401k and ESOP are qualified plans, the NUA potential appears intact, and his cost basis should not change. If the shares are being retired in favor of shares of the inquiring company, then the cost basis should be transferred to those new employer shares. Still, there may be some reason that the employer will not show NUA on the 1099R for the LSD year, and that would eliminate NUA. Client needs to get more specific information from the employer about his NUA prospects.