NUA Rule Clarification
Client has 1,000 shares of ABC stock in 401k, 500 shares have basis of $50 and the other 500 shares have basis of $100.
Client wants to retain all shares but use NUA for the lower basis 500 shares.
I understand moving the lower basis shares and logistics but was under the impression the other shares had to be sold and bought back after the rollover to IRA was complete. The plan is willing to move the lower basis to non IRA Brokerage account and electronically send the other 500 shares to IRA without the need to sell. This is great if not an issue with NUA rules but had been under the impression you had to sell all shares but ones you were moving via NUA.
I hope my question is clear and will be great news if no selling has to be done on shares intended to be rebought in the IRA. The plan has all shares broken down by lot so very easy logistically and maybe this plan has more options then others I have worked with but don’t want to run afoul of the NUA rules.
Permalink Submitted by Alan - IRA critic on Sun, 2021-12-19 16:37
No selling must be done. The employee only has to complete the LSD, but employer shares that will not be used for NUA can be rolled over to an IRA or sold while still in the 401k. The 401k plan of this client must track the cost basis of various lots of employer shares as they evidently do, and not use the usual average cost basis for all the shares. But if they will do that and the client only wants some of the shares utilized for NUA, it’s smart to select the lowest cost shares for NUA use. Of course, whether all shares are used for NUA or not, the client should still consider any diversification issues.