medium · Certified Financial Planner Psychology
The Nguyen family owns employer stock in a 401(k) plan and is considering a Net Unrealized Appreciation (NUA) distribution. The stock has a current fair market value of 200,000 and a cost basis of110,000.
Which statement regarding the tax consequences of this NUA distribution is accurate?
- No tax is due until the stock is sold if the distribution is made to a brokerage account.
- The $110,000 cost basis is taxed as ordinary income in the year of distribution.
- The entire $200,000 is taxed as a long-term capital gain in the year of distribution.
- The $90,000 of appreciation is taxed as ordinary income at the time of the distribution.
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