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February 16, 2009

Net Unrealized Appreciation ( NUA)

Your Guide

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Definition

The increase in value of employer securities while they are held in a qualified plan . For instance, if 100 shares of the security was purchased at a value of $10,000 in the employee’s account, and the current value of the 100 shares is now $15,000;  $10,000 is the basis and $5,000 is the NUA.

  • NUA is excluded from the income of the participant when the stocks are distributed as part of a lump-sum distribution.
  • An exception to the lump-sum rule applies to employer securities purchased in the plan with employee-contributions
  • The NUA is included in the participant’s income for the year the employer stocks are sold

Referring Cite

IRC §402(e), Treas. Reg. §1.402(a)-1(b), IRS Publication 575

Additional Helpful Information

  • The term “securities” means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form.
  • The term “securities of the employer corporation” includes securities of a parent or subsidiary corporation of the employer corporation.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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