Employer Shares

Submitted by Alon David on Fri, 2021-09-03 18:22

I recently inherited a brokerage account from my mother. She worked for a healthcare company and she has company shares held at a company called Computershares. I am currently in the process of transferring it to my brokerage firm. My question revolves around the nuances on the type of shares these are. I spoke with Computershares and they werent really too helpful. All I know is that these are company shares.

However are there different types of company shares? Are these the same as would be purchased on the NYSE? Does it coming straight from the company have any advantages that I should be aware of before making the transfer? Different dividend or interest schedule?

Thank you in advance



Submitted by Alan - IRA critic on Sat, 2021-09-04 17:54

There could be. In addition to common stock, there is preferred stock shares, and convertible preferred stock shares. it is unlikely but still possible that these are NUA employer shares that she distributed from her employer plan, and if that is true then the NUA per share does not get a basis adjustment upon her death. The easiest way to determine if these are NUA shares is determining if they are shares of the company she worked for, or a spin off of the company she worked for. Her tax preparer might also know or Computershare might know if they were told. None of this changes if you transfer the assets from her brokerage to yours, but you should find out before you actually sell any of these shares. If not NUA shares, you should determine the value per shares as of her date of death, so you would know before selling how much cap gain tax you would owe, if any.

Submitted by Alon David on Sun, 2021-09-05 04:24

Hi does NUA matter if the account is not a retirement account? From what I gathered this was an account where my mother was able to purchase company stock seperate from her 401k but it registers into a regular taxable brokerage account. Wouldnt I want the step up in basis if I plan to sell these shares, so NUA would not be the preferred route?

Submitted by Alan - IRA critic on Sun, 2021-09-05 16:51

If your mother distributed the shares from her retirement plan as NUA shares, you would not have a choice but to treat them as inherited NUA shares. However, it sounds more like she had an employee stock purchase plan which is not a qualified plan and not eligible for NUA. Therefore, you would receive a full basis adjustment as of her DOD. A beneficiary benefits less from inheriting NUA shares than non NUA shares.

Submitted by Alon David on Sun, 2021-09-05 16:52

Yes that was my reasoning as well. Thank you for your help, a huge help during this difficult time. 

Submitted by Alon David on Sat, 2021-09-11 00:12

I am initiating the transfer from CS. They said they cannot transfer the fractional share portion and that I would have to sell that portion before the transfer. What does this mean for tax purposes? Also I intend to sell all the shares and reinvest them into an ETF. Does it matter whether they are sold at CS vs. my brokerage for tax purposes?

Submitted by Alan - IRA critic on Sat, 2021-09-11 01:11

Were you able to determine if these are NUA shares, employer stock purchase plan (ESPP) shares, or something else?  You need to determine this to know what amount would be taxable when you sell them. If these are not NUA shares, there should be basis adjustment to the value on mother’s date of death.  Value in excess of that would be taxable at long term cap gains rates when you sell. The sale of a partial share would be treated the same way as if you later sold full shares, but since a partial share would not have much value, the tax impact would be very small. It seems like Computershare should be able to provide more detailed info than they have to date.

Submitted by Alon David on Thu, 2021-09-30 19:02

It seems that these might be ESPP shares but I have to make sure. Would that change the process of how I go about selling these shares?Thank you

Submitted by Alon David on Mon, 2021-09-13 20:49

They were unfamiliar with the term NUA, but they just said that they are regular common stock shares. It sounds like this is strictly a taxable account with regular common stock shares. Is it as simple (for tax purposes) as transferring any taxable account I personally have? Then selling the shares.

Submitted by Alan - IRA critic on Mon, 2021-09-13 22:10

Yes, if not NUA shares, the cost basis would be the value on her DOD, so you would owe LT Cap gains tax on any appreciation since then.

Submitted by Alon David on Mon, 2021-09-13 22:15

Since this is a taxable account, wouldn’t I be correct in thinking that NUA would be less beneficial. In what scenario would NUA shares be beneficial in a taxable (non retirement) account?

Submitted by Alan - IRA critic on Mon, 2021-09-13 23:35

Yes, NUA is less beneficial when inheriting NUA shares that have been already been distributed than inheriting non NUA shares because there is no basis step up for the NUA amount. However, if you inherited a 401k plan with the shares still in the plan, you would not get a basis step up but you would still get the lower cap gain rate on the the amount of NUA for the shares. So inheriting regular shares is best, inheriting NUA shares still in the plan second best, and inheriting non NUA shares still in the 401k the most costly.

Submitted by Alon David on Tue, 2021-09-14 03:56

Thank you

Submitted by Alon David on Thu, 2021-09-30 19:08

It seems that these might be ESPP shares but I have to make sure. Would that change the process of how I go about selling these shares?Thank you

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