Why Won't Anyone Answer This ???????


B

BobLeavitt

Someone reading this post has to have dealt with issue. Am
I not stating the issue clearly or properly?

Exactly how does one report NUA on Sched D for the tax year
in which some of the stock subject to NUA is sold. I cannot
find relevant instructions anyplace. (Actually, I wonder
if the IRS even keeps track of the NUA reported on Forms
1099R).

For example, rec'd distribution of 1000 shares of company
stock from 401K on May 15, 2001. 1099R showed:
Box 1 - $38,180
Box 2a - $12,680
Box 6 - $25,500

Sold 400 shares of subject stock on Dec 1, 2003 for $37.00

I assume I show on Sched D a LT loss based of $472 (400
shares x $1.18)

But where/how do I have report and describe the LT gain in
respect of the NUA of $10,200 (400 shares x $25.50).

Of course, in this instance, I could simply report netting
the $25.50 LT gain against the $1.18 loss, but I do not
think that is what the IRS expects, nor would it work if I
had only held the stock for a couple of weeks following
distribution before selling it.

There is a ton of material out there on what NUA is and what
goes on the 1099 for the year of distribution, but nothing I
can find on how you report when stock is sold. Preferably
someone could point me to the relevant instructions, but if
not, maybe someone could explain it to me. I will very much
appreciate any assistance.

Thanks, Bob Leavitt
 
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H

Harry Boscoe

IRS will be quite satisfied if you - in your example -
report a LTCG of $9,728 [better check my arithmetic] on
Schedule D.

I assure you, the IRS doesn't track NUA on distributed
shares of employer stock.

You're thinking too hard. <g>

--Harry B.
 
A

A

BobLeavitt said:
Someone reading this post has to have dealt with issue. Am
I not stating the issue clearly or properly?

Exactly how does one report NUA on Sched D for the tax year
in which some of the stock subject to NUA is sold. I cannot
find relevant instructions anyplace. (Actually, I wonder
if the IRS even keeps track of the NUA reported on Forms
1099R).

For example, rec'd distribution of 1000 shares of company
stock from 401K on May 15, 2001. 1099R showed:
Box 1 - $38,180
Box 2a - $12,680
Box 6 - $25,500

Sold 400 shares of subject stock on Dec 1, 2003 for $37.00

I assume I show on Sched D a LT loss based of $472 (400
shares x $1.18)

But where/how do I have report and describe the LT gain in
respect of the NUA of $10,200 (400 shares x $25.50).
You are using the FMV of the distribution as your basis,
however, Reg. §1.402(a)-1(b)(1)(i) states:

"The amount of net unrealized appreciation which is
excludable under the regulations of (a) and (b) of this
subdivision shall not be included in the basis of the
securities in the hands of the distributee at the time of
distribution for purposes of determining gain or loss on
their subsequent disposition."

So assume your basis in the stock is $12.68 * 400 = $5,072,
then you realized a gain of $9,728 (400*$37=$14,800-$5,072)

If it was not a lump-sum distribution of the 401(k) than the
gain is simply classified as long or short depending on the
holding period.

In essence, you were not taxed on the NUA at time of
distribution so you are be taxed at time of dispostion.
 
E

Ed Zollars, CPA

BobLeavitt said:
Someone reading this post has to have dealt with issue. Am
I not stating the issue clearly or properly?
Generally you'll find on this group that someone will answer
a query if it meets one of two criteria:

1. It is something they deal with regularly in their
practice. In your case, you would need someone who has a
number of clients with NUA situations and so deals with
these matters day in and day out.

2. It is something they may not deal with, but they see a
chance of it becoming important in their practice in the
near future, so it may be worth the time to research the matter.

Finally, they need to a) have the time to have read your
query, b) have the time to respond and c) just feel good
about doing it (you don't get paid for things posted here).

Given the time of year, you'll find that it's tougher for a
question to meet the above criteria. So while I might think
the matter might be "interesting" if posed in July, right
now it's not nearly as interesting since paying clients are
posing enough questions to deal with for which (amazingly
enough <grin>), I get paid to deal with.

In essence, right now if I want to deal with a tax matter as
an intellectual exercise, I can find one that pays to deal
with <grin>.
 
B

BobLeavitt

Ed Zollars said:
BobLeavitt wrote:
Generally you'll find on this group that someone will answer
a query if it meets one of two criteria:

1. It is something they deal with regularly in their
practice. In your case, you would need someone who has a
number of clients with NUA situations and so deals with
these matters day in and day out.

2. It is something they may not deal with, but they see a
chance of it becoming important in their practice in the
near future, so it may be worth the time to research the matter.

Finally, they need to a) have the time to have read your
query, b) have the time to respond and c) just feel good
about doing it (you don't get paid for things posted here).

Given the time of year, you'll find that it's tougher for a
question to meet the above criteria. So while I might think
the matter might be "interesting" if posed in July, right
now it's not nearly as interesting since paying clients are
posing enough questions to deal with for which (amazingly
enough <grin>), I get paid to deal with.

In essence, right now if I want to deal with a tax matter as
an intellectual exercise, I can find one that pays to deal
with <grin>.
Ed, thanks to you and the others who took the time to reply.

With all the information available about NUA on the web, I
figured there must be practitioners who deal with it
regularly. However, I gather if anyone does deal with NUA
regularly, (a) they don't hang out here, or (b) they don't
have the time or inclination to respond.

Of course, the information out there deals with the nature
of NUA is, why it might be a worthwhile financial/tax
strategy, how it gets reported on a 1099-R and a general
description of what happens when stock having NUA is sold.
Nothing specific re the latter. So I also could conclude
that (c) nobody receiving stock and NUA has sold, or (d)
people inadvertently "forget" to report the NUA when they
sell.

Thanks again.

Bob Leavitt
 
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D

Drew Edmundson

snip
Ed, thanks to you and the others who took the time to reply.

With all the information available about NUA on the web, I
figured there must be practitioners who deal with it
regularly. However, I gather if anyone does deal with NUA
regularly, (a) they don't hang out here, or (b) they don't
have the time or inclination to respond.

Of course, the information out there deals with the nature
of NUA is, why it might be a worthwhile financial/tax
strategy, how it gets reported on a 1099-R and a general
description of what happens when stock having NUA is sold.
Nothing specific re the latter. So I also could conclude
that (c) nobody receiving stock and NUA has sold, or (d)
people inadvertently "forget" to report the NUA when they
sell.
The reason I didn't answer is that "A", whoever that is, has
already given you the answer using your numbers and all.

Drew Edmundson, CPA (NC)
 
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