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Old 05-05-2014, 10:22 PM   #21
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Careful. I think NUA only applies if you do what IRS defines as a lump sum distribution.
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Old 05-05-2014, 11:02 PM   #22
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Careful. I think NUA only applies if you do what IRS defines as a lump sum distribution.
Thanks... I will look into this...


I will have to find out if they mean 100% of the account, or something else.... but, I will do it right...
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Old 05-06-2014, 07:13 AM   #23
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Wow, that's great news! Sounds like a great opportunity. Just had one other thought... if you're under 59 1/2 I'm pretty sure the distribution is subject to a 10% penalty. Don't know how old you are and I'm not saying it's still not worth taking the NUA treatment... just a thought.
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Old 05-06-2014, 07:23 AM   #24
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Wow, that's great news! Sounds like a great opportunity. Just had one other thought... if you're under 59 1/2 I'm pretty sure the distribution is subject to a 10% penalty. Don't know how old you are and I'm not saying it's still not worth taking the NUA treatment... just a thought.
I did not know this at the time but learned it as I was preparing my income tax return the following year: The 10% penalty applies only to the cost basis of the company stock, not the NUA itself. This was a hugely pleasant surprise for me because the NUA in my case was about $288k and the cost basis was about $10k, making the penalty only $1k, not $30k.

The presence of the large NUA, even though it was taxable at the 15% LTCG rate (this was back in 2008, before it got raised for higher incomes), triggered the AMT for the relatively small remainder of my income, costing me about $5k more in federal income taxes. Still a mere bag of shells compared to the $29k of "found" money from not paying any 10% penalty on it.
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Old 05-06-2014, 08:26 AM   #25
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Careful. I think NUA only applies if you do what IRS defines as a lump sum distribution.
Yep, that's what the article I linked points out:

"IRC section 402(e)(4)(A) provides a special rule for a distribution from a plan that includes employer stock. In order to qualify for this special treatment, the payment must be a lump-sum distribution as prescribed by IRC section 402(e)(4)(D). The NUA on employer stock is not taxed when the stock is distributed. Rather, it is generally taxed at long-term capital gain rates when the stock is sold ....."
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Old 05-06-2014, 08:31 AM   #26
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I did not know this at the time but learned it as I was preparing my income tax return the following year: The 10% penalty applies only to the cost basis of the company stock, not the NUA itself. This was a hugely pleasant surprise for me because the NUA in my case was about $288k and the cost basis was about $10k, making the penalty only $1k, not $30k.

The presence of the large NUA, even though it was taxable at the 15% LTCG rate (this was back in 2008, before it got raised for higher incomes), triggered the AMT for the relatively small remainder of my income, costing me about $5k more in federal income taxes. Still a mere bag of shells compared to the $29k of "found" money from not paying any 10% penalty on it.
Yes. And I don't think the 10% penalty applies if you're "retiring" from your employer and are age 55+.
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Old 05-06-2014, 09:33 PM   #27
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Again, thanks for all the replies...

I am not yet old enough to prevent penalty... I am just thinking ahead on what I want to do when I do stop working and before SS etc. kicks in...

I am not as lucky as scrabbler... my gain is a bit more than 50% of the total value... and dropping ... but I think it will be higher in a few years when I plan to take the distribution...

I did look and found the reference to the lump sum... glad to know about it as I will have to try and get very little income the year I convert... wished I could have done it over a few years...
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