Retirement Planning- 7 Net Unrealized Appreciation (NUA)

Question 1

What does Net Unrealized Appreciation mean?

Answer 1

Net Unrealized Appreciation means to trade ordinary income taxation on retirement
assets for long-term capital gains treatment

Question 2

What 3 things must happen for NUA to become a viable strategy?

Answer 2

1. Lumpsum distribution
2. Triggering event
3. In-kind transfer of employer security to a brokerage account

Question 3

What are the triggering events to enact NUA?

Answer 3

(a) Death, (b) Disability, (c) Separation from Service, or (d) Reaching age 59 ½.

Question 4

NUA is the difference in value between

Answer 4

the cost basis of company stock and its market value at the time it is distributed in kind from a plan as part of a lump-sum distribution.

Question 5

True or False
NUA is IRD and does not receive a step up in basis if the participant dies.

Answer 5

True

Question 6

True or False
All assets must leave the employer’s plan in the year of an NUA- one can roll non-employee stock or employer stock for which we do not want to do the NUA to an IRA and then move employer stock to the brokerage account in kind.

Answer 6

True