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
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.