NUA 101: Turning Company Stock in your 401(k) into Long-Term Capital Gains
If you've ever wondered whether there's a smarter way to use company stock inside your 401(k), this episode is for you. Greg and Scott unpack Net Unrealized Appreciation (NUA). This provision allows eligible retirees to distribute company shares at a basis taxed as ordinary income, while the embedded growth can later be realized as long-term capital gains. In this episode: When NUA applies (company stock only, final liquidating distribution) and how it differs from IRAs/Roths The hybrid holding period and what qualifies as long- vs short-term after distribution The NIIT (3.8%) expectation on the NUA portion and why recordkeeping matters Using NUA to bridge early retirement (no 10% penalty) and reduce future RMDs ExxonMobil plan nuances: lot-level tracking and post-1986 after-tax trading balances to lower basis Common mistakes: over-trading inside the plan, timing partial distributions at/after 59 1/2, concentrating risk Estate & gifting angles: IRD (no step-up), charitable giving, and bracket-aware family gifts Who does this help: long-tenured employees with large company-stock positions (e.g., ExxonMobil) who want tax diversification and flexibility in the first 5-10 years of retirement. Disclaimer: For educational purposes only. Consult your tax advisor before acting.
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