Net unrealized appreciation (NUA) is the difference between the original cost basis and current market value of shares of employer stock. The downside is that ordinary income tax must be paid immediately on the cost basis of the shares of employer stock.
Does Nua get a step up in basis?
The NUA does not receive a step-up in basis upon death, it is instead treated as income in respect of a decedent. If there is any additional gain above the NUA, the long-term/short-term capital gains will be decided by looking at the holding period after distribution.
What do you mean by net unrealized appreciation?
What is ‘Net Unrealized Appreciation – NUA’. The net unrealized appreciation (NUA) is the difference in value between the average cost basis of shares and the current market value of the shares held in a tax-deferred account.
How is net unrealized appreciation ( Nua ) taxed?
Net unrealized appreciation (NUA) is the tax-advantaged increase in value of an employee retirement plan at the time you take a lump-sum distribution into a taxable brokerage account. The difference in value is taxed at long-term capital gains rates instead of as ordinary income.
When do you pay tax on an unrealized gain?
Normally, you do not pay tax on this net unrealized gain until you sell the stock, and at that time it will be taxed at the long-term capital gains tax rate even if you sell it right away. You can make a special election to have the NUA added to your income—and pay the associated capital gains tax—in the year of distribution.
When to use additional appreciation for tax purposes?
This approach may make sense if your income for the current year affords you a low capital gains tax rate and you expect your future income and capital gains tax rate to be higher. Additional appreciation refers to capital gains earned after you distribute the stock, if it continues to increase in price.
