NUA from someone taking RMDs, but RMDs are NOT of company stock
I understand that an RMD activates a trigger event, but what if the retiree specifically did not use the stock for his RMD. Client retires in 2003 (age 55), he takes a distribution of company stock from 401k in 2004. Once he starts taking RMDs, he advises his provider to NOT pull from the company stock for those funds. Since he hasn’t touched the company stock portion of his 401k since after the triggering event of being 59 1/2, would he still qualify for NUA treatment?
Permalink Submitted by Alan - IRA critic on Fri, 2024-09-20 12:54
No, he would not qualify for NUA unless he took a lump sum distribution of all similar plans of the employer, sending the appreciated employer shares to his taxable brokerage account in the same year as the first RMD distribution. Any distribution after reaching 59.5 but prior to the LSD year is an intervening distribution that will disqualify NUA.
Instead, many people in this position would use the stock distribution for the RMD, and in some cases if the stock value is high enough, defer the first RMD to the following year when two RMDs would be required, and the value of the shares are enough to satisfy both years RMDs.
In other words, any distribution following the last triggering event (59.5 in this case) in a year prior to the LSD year is an intervening distribution regardless of whether it includes the shares or not.