Has anyone successfully used the approach to a NUA transaction suggested below? ?
It has been suggested to me that I can avoid the immediate ordinary income tax burden on a NUA (net unrealized appreciation) transaction for company stock held in my 401k by depositing an equivalent amount in a rollover IRA. By way of example:
If I NUA 1000 shares of company stock with a founders basis of $5 and a FMV of $50, I would have an immediate ordinary income tax liability of 1000 X $5 or $5000. I would then owe LTGC tax on the difference between FMV and founders basis when I sell.
The variation I was encouraged to use goes as follows. Instead of paying ordinary income tax on the $5000 at the time of the NUA transaction, transfer 100 shares (with $50 FMV each) to a rollover IRA. Take the 1000 shares out free and clear. Otherwise this follows a classic NUA transaction.
It has been suggested to me that I can avoid the immediate ordinary income tax burden on a NUA (net unrealized appreciation) transaction for company stock held in my 401k by depositing an equivalent amount in a rollover IRA. By way of example:
If I NUA 1000 shares of company stock with a founders basis of $5 and a FMV of $50, I would have an immediate ordinary income tax liability of 1000 X $5 or $5000. I would then owe LTGC tax on the difference between FMV and founders basis when I sell.
The variation I was encouraged to use goes as follows. Instead of paying ordinary income tax on the $5000 at the time of the NUA transaction, transfer 100 shares (with $50 FMV each) to a rollover IRA. Take the 1000 shares out free and clear. Otherwise this follows a classic NUA transaction.
