medium · Certified Financial Planner Retirement
Julian Ellison, age 60, is separating from service and holds employer stock in his 401(k) worth 500,000 with a cost basis of 140,000. If he elects Net Unrealized Appreciation (NUA) treatment
Which statement best describes the tax consequences?
- He avoids all immediate taxation and pays long-term capital gain tax on the full 500,000 when sold.
- He pays ordinary income tax on 140,000 now, and growth is taxed as long-term capital gain when sold.
- He should roll the stock into an IRA to defer the ordinary income tax on the entire 500,000 balance.
- He pays ordinary income tax on 500,000 now, with all future growth being tax-free.
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