Nua On Employer Stocks

[Guest AFRICA6796]

I read in a brochure that for employer stocks, the following can be done:

Say the basis is $10,000

The value at distribution is $50,000

The $10,000 ( stock) may be rolled to an IRA and

The $40,000 ( NUA) can be held in a regular cash account or in hand.

The $40,000 (stock) will receive the long-term capital gains treatment when sold.

Is this true?

I thought that in order to get the NUA treatment, none of the assets could be rolled to an IRA.

[Guest Harry O]

There is an old IRS private letter ruling to this effect (sometime in the mid-1980s). However, I don't believe that sensible tax professionals believe that the ruling is correct. In addition, I understand that the IRS now says unofficially that the ruling is incorrect. Nevertheless, PLRs are authority that can be used to avoid penalties so aggressive taxpayers may wish to pursue this strategy. Note that your Schedule D to Form 1040 will look a little strange when you sell the stock -- you will be reporting $0 basis in the shares. You don't see that very often. So it could raise the interest of an agent . . .

[Appleby]

Check out this PLR