NUA earnings
NUA – if you roll out company stock you pay income taxes on the basis. Do you pay capital gain on the game the same year as the rollover or when you sell the stock.
What are the implication if some of the company shares where purchased with post tax-money. Can you just roll the pre-tax share into a brokerage account and sell the Roth shares before distribution?
Permalink Submitted by Alan - IRA critic on Wed, 2024-06-12 17:52
LTCG taxes on the sale of NUA shares is not due until the year they are sold.
Both after tax contributions to the pre tax account and Roth contributions are post tax. If NUA shares are in the Roth 401k sub account, a taxpayer would not utilize NUA on them because tax free beats CG taxes. If the shares are treated by the plan as purchased with after tax non Roth funds, then the taxable cost basis of those shares would be reduced as indicated by Box 2a of the 1099R. If you have non Roth after tax contributions in the plan, you should verify with the plan how they will apply them in a lump sum distribution for NUA purposes.
In any case, you can sell NUA shares in the plan prior to the distribution if you don’t want to utilize NUA on them, and directly roll those amounts to an IRA or Roth IRA instead of distributing them to your brokerage account.