Net Unrealized Appreciation (NUA) Rules – Can I Do A Net Unrealized Appreciation (NUA) Distribution?

2026 · CAN I DO A NET UNREALIZED APPRECIATION (NUA) DISTRIBUTION?
Do you have employer stock (or stock resulting from a corporate re-org, merger or spinoff) in an employer retirement plan?Was part or all of the employer stock distributed in-kind to a taxable brokerage account?The cost basis of the shares is subject to ordinary income tax upon distribution from the retirement plan.Was the entire vested account balance (not just the employer stock) distributed from the employer plan in a single tax year?Sorry, you do not qualify for an NUA distribution. You must wait until the next triggering event before doing an NUA distribution.If you do an NUA distribution, you can roll the non-employer stock investments into an IRA or an eligible retirement plan (or convert to a Roth IRA) to potentially minimize your tax liability.If on Medicare, you maybe subject to IRMAA surcharges. See “Will IAvoid IRMAA SurchargesOn Medicare Part B & Part D?” flowchart.Unrealized gains that occurred within the retirement plan will be taxable as LTCG (regardless of the holding period) when the employer stock is sold, but not subject to the 3.8% Medicare surtax (NIIT).Subsequent gains incurred beyond the date of the distribution will be taxed as STCG or LTCG based on the holding period from the distribution date until the time of sale.The cost basis of the shares is subject to ordinary income tax and possibly a 10% penalty upon distribution from the retirement plan.In addition, you may be subject to the 3.8% Medicare surtax (NIIT).You qualify for an NUA distribution for the portion of the employer stock rolled over to a taxable brokerage account. Continue on to determine your tax liability.Do you have investments in the retirement account, other than employer stock (such as mutual funds)?YesNoNoYesNoYesNoYesNoYesIs it phantom stock orstock options?Are you over theage of 59 ½?Did this distribution occur after a triggering event, such as death, separation from service, or reaching age 59 ½?YesNoYesNoSorry, you cannot doan NUA distribution.START HERE
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