NUA lost if plan to plan transfer? (or if partial transfer?)

[Guest jbergstrom]

I have a client with a 401(k) from an old employer; just as I was about to roll it to an IRA, I noticed that of the $50k value, $35k was in ESOP shares of employer stock. My question has three parts- first, I don't think I can seperate the investments and roll only the $15k and leave the ESOP shares for NUA treatment later (she is 57)- can anyone confirm this?

Secondly, I think I also lose the NUA if I create a uni-401k (she is self-employed) and do a like-kind transfer of the shares- again, confirmation?

Finally, I do believe that if I wait until she is 59-1/2 and have her take a LSD at that time, then I can roll the (today's value) of $15k and take the cap gain rate (assuming it's still low) on the ESOP shares. Anyone know the IRC that would say this is okay?

[Guest Harry O]

1. Yes, you are correct.

2. Correct again.

3. Your client must wait until she is 59.5 to get the ESOP shares out in order to qualify for NUA treatment. Don't take the distribution before that date. You also ought to contact the old employer and make sure they will report the NUA exclusion per these rules. Don't take the chance that they actually know these rules in great detail!