I have 401k plan with ESOP value around 1,000,000. The cost basis is very low at about 150,000. My 401k also has regular mutual fund investments at about 500,000. I also have other IRA accounts (outside 401k) at about 600,000. I have never touched my 401k yet. When I will turn 73 (next year after 72), I plan to close my 401k and use NUA technique in paying for 1st required RMD (by April of year I turn 73) and 2d required RMD (by end of year I turn 73). I understand that I need to do NUA first and then transfer remaining stuff from 401k to IRA (same year). As per above, my total required RMD (1st and 2d year) are less than NUA. In addition to using NUA to pay for RMD from 500,000 mutual funds that I had in 401k — can I ALSO use NUA to pay for RMD stemming from outside IRA accounts (600,000) , which were never part of 401k?
Assuming that I have no other income in the year when I turn 73 and do NUA — am I correct that my taxes will be based only 150,000 income from NUA cost basis — as combined RMD for 1st year and 2 year are less than 150k NUA cost basis.