Net Unrealized Appreciation

Submitted by Donald Moore on Mon, 2015-08-17 18:43

I have a client that is retiring soon. There is approximately $1.5 million in his ESOP. The company stock is not publically traded and he has no cost basis in the stock. However, there was a value basis established on the stock each year as it was given him.

My question is; can this be an NUA situation?

Thanks for all replies.



Submitted by Alan - IRA critic on Mon, 2015-08-17 19:27

  • Yes, it could be. The NUA cost basis is the price paid for the shares when purchased by the ESOP. That is likely the figure he has been provided with, but to determine if NUA is worthwhile, he needs to determine the % of cost basis relative to the current value of the shares. NUA is best used if the cost basis is less than 30% of the current value. Client also needs to know what the plan requires upon retirement. The shares might have to be sold back to the plan or company and he would have to weigh an IRA rollover vs. a full or partial LSD for NUA purposes. In other words, due to the shares being private he may not have the option of taking the shares and selling them when he wishes to in order to spread out the cap gains.

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