easy · Certified Financial Planner Professional Conduct
The Kline household is retiring and moving their entire 401(k) balance, which includes 200,000 of employer stock with a40,000 cost basis, to a brokerage account.
If they make a Net Unrealized Appreciation (NUA) election, how is the $40,000 cost basis taxed?
- As ordinary income in the year of the distribution.
- It is not taxed until the stock is eventually sold.
- As long-term capital gains in the year of the distribution.
- As a tax-free return of basis.
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