RMD utilize NUA strategy
In order to meet the 2024 and 2025 RMD, I would like to utilize NUA to direct transfer in-kind portion of my IBM employer shares from my 401(k) to my brokerage account and rollover the remaining balance to TIRA later before the year end. I am unable to carry out the direct transfer for a portion of NUA or the rollover of the remaining balance to TIRA since Fidelity is not the trustee of IBM stocks, according to the IBM benefit team. I will receive the ownership certificate from them.
Is the in-kind direct transfer feasible? My 401K, brokerage and TIRA accounts are in Fidelity.
Does NUA lose its eligibility due to the issuance certificate of ownership?
Thank you,
Permalink Submitted by Alan - IRA critic on Fri, 2025-02-14 22:00
The distribution of stock certificates should not negate the use of NUA as long as a qualified LSD is completed, but as always the 1099 R form issued to report the distribution must show the amount of NUA in Box 6 and the cost basis in 2a, and the “total distribution” box must be checked.
You should be able to deliver the stock certificates to your brokerage and see if they will be able to reflect their proper cost basis as NUA shares and holding period (date of distribution). If not, they will treat the shares as “uncovered” when you sell them, and you will have to show the correct cost basis on Form 8949.
If you did not plan to use all the IBM shares for NUA, perhaps you could sell the other IBM shares in the plan and then roll the proceeds with the rest of the plan to your IRA. That would eliminate the need to have some certificates rolled to your IRA, which could be troublesome.
Permalink Submitted by Hong Nguyen on Fri, 2025-02-14 22:43
Thank you very much Alan!
Permalink Submitted by Alan - IRA critic on Fri, 2025-02-14 23:04
I should have noted that you appear to be using a popular strategy of deferring your first RMD to the following year, then using the distribution of NUA shares to satisfy the RMD for both years. Both the cost basis and the NUA amount counts toward these RMDs even though only the cost basis is taxable if the share distribution is enough to cover both RMDs.