medium · Certified Financial Planner General Principles
Ms. Brennan is separating from service and holds employer stock in her 401(k) with a cost basis of 150,000 and a fair market value of200,000. Her planner is evaluating the Net Unrealized Appreciation (NUA) strategy.
What is the most significant bottleneck for this specific transaction?
- The requirement to hold the stock for one year after distribution to get LTCG
- The cost basis ratio is too high, potentially wiping out the LTCG benefit
- The mandatory 10% penalty on the entire NUA distribution
- The NUA election destroys the ability to perform any future Roth conversions
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