Net unrealized appreciation
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Definition
The excess of employer securities’ fair market value over the plan’s cost basis at distribution; taxed as long-term capital gain when the election is made.
Net unrealized appreciation in plain English
A long-time employee takes a lump-sum distribution of company stock from the plan and expects ordinary income on the entire fair market value. Net unrealized appreciation is the excess of the employer securities' fair market value over the plan's cost basis at distribution; with the election, that NUA slice can be taxed as long-term capital gain when sold, while basis is taxed as ordinary income at distribution. It is a distribution-timing tax strategy for employer stock, not a free step-up and not automatic without meeting the rules.
Practice Net unrealized appreciation
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