Net unrealized appreciation (NUA) vs. IRA rollover?

Consideration of NUA strategy is important if you are distributing highly appreciated employer securities from your prior employer's qualified plan, such as 401(k). Cost basis, the value of the employer contribution on your behalf is subject to ordinary income tax upon distribution. In addition, the 10% early distribution penalty may apply unless you have an exception (i.e. attained age 55 or older and separated from service). Taking in kind distribution allows the appreciation (NUA) above the cost basis to be taxed at the more favorable capital gains tax rate. For this reason, upon separation from service it may be more tax advantageous to transfer the employer securities to a regular taxable account instead of rolling the asset into an IRA where future distribution will be taxed as ordinary income.
Assets and Assumptions
Current 401(k) company stock balance ($) 
Total stock purchases (cost basis) ($) 
Anticipated investment return (%) 
Holding period after 401(k) (years) 
Holding period after 401(k) (months) 
Marginal income tax rate (%)help
Capital gains tax rate (%) 
Separated from service PRIOR to age 55? 
Current distribution PRIOR to age 59 1/2? 
Final distribution PRIOR to age 59 1/2? 
The information provided here is to assist you in planning for your future. Any analysis is a result of the information you have provided. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.

Any rate of return entered into the interactive calculator to project future values should be a reasonable average return for the period. Rates of return will vary over time, and generally the higher the rate of return the higher the degree of risk.

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