Nua & 3.8% NIIT
Hi,
My understanding is that NUA is not subject to the 3.8% Medicare surtax if later sold in a taxable brokerage account. For example if cost basis of company stock in 401(k) is $10,000 and current market value is $100k, then if the stock is pulled out of the 401(k) and moved to a brokerage account using NUA and then immediately sold, the $90k of appreciation wouldn’t be subject to 3.8% net investment income tax. Is this correct?
Second question, how about capital gains post NUA transaction. Using the example above lets say the stock is sold 2 years later at $190,000 in the brokerage account ($180k above cost basis). The $90k of NUA isn’t subject to NIIT but is the $90k of capital gains above NUA subject to the net investment income tax?
Permalink Submitted by Brandon Blanchard on Fri, 2021-03-05 15:40
Would the dividend income on the NUA stock in a taxable account be subject to NIIT?
Permalink Submitted by Alan - IRA critic on Fri, 2021-03-05 15:58
Correct, the amount of NUA per share is not subject to the NIIT, nor does it receive a basis adjustment upon death. Subsequent gains after distribution are subject to NIIT, and do get a basis adjustment upon death. Therefore, the sale for 190,000 after a year has passed will generate a LTCG of 180,000, with 90,000 of that subject to NIIT.