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Visitor IV

Net Unrealized Appreciation Question

I am looking for information to help me determine whether I can/should use a Net Unrealized Appreciation  Strategy with my 401(K) plan.

 

First some background info. I am 59 and 6 months. We filed a joint tax return for and our 2017 adjusted gross Income was $74,746.

 

I  separated from my employer  June 2016, where I have a 401(K) with approximately $754K.  Approximately 12.41% ($93.56K) is invested in company stock with cost basis of $43.8K. The rest is invested across 8 different mutual funds. 

 

I am looking at the potential of rolling over the 401(K) to another employer's 401(K), or maybe even to an IRA. However, I learned that rolling over shares of company stock  can be complicated because my new employer's 401(K) will not include my previous company's stock that is in my 401(K). 

 

The advisor for my 401(K) suggested that I seek tax advice on whether Net Unrealized Appreciation (NUA) strategy might work for me.  I have researched NUA but I am not clear on how it works, how I can use it as a strategy, and how to execute it. As best I can tell, NUA requires a lump sum distribution, but I don't know if this is a distribution of the company stock only or for the full 401(K).

 

So my questions are;

(1) What is a Net Unrealized Appreciation strategy?

(2) How exactly is it executed?

(3) Does it require lump sum distribution of the full 401(K) or can I take a distribution on the company stock only?

 

Any assistance and advice is greatly appreciated