Anybody know about net unrealized appreciation???

[gerntz]

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+.

 

[Texas Proud]

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...