medium · Certified Financial Planner Investment Planning
The Moreau family owns 500,000 of employer stock in a 401(k) plan with a cost basis of 40,000.
If they use the Net Unrealized Appreciation (NUA) strategy upon separation from service, how is the 40,000 cost basis taxed?
- As ordinary income in the year of distribution.
- As long-term capital gain in the year of distribution.
- It is not taxed until the stock is eventually sold from the brokerage account.
- As a tax-free return of basis.
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