INHERITED NET UNREALIZED APPRECIATION (NUA)
01.Core Concepts
• Lump-sum distribution of employe r securities during lifetime of participant • Usually from ESOP or stock bonus plan, but could be from any qualified plan • Determination of taxes when there is inherited net unrealized appreciation (NUA): Fair market value at date of death Less: Unrecognized NUA Equals: Inherited basis NET UNREALIZED APPRECIATION: EXAMPLE • Lexon Inc. contributed $20,000 worth of stock into Sofia’s stock bonus plan. • Ten years later, Sofia leaves Lexon and receives a distribution of stock, worth $100,000. • Sofia dies unexpectedly nine months after the date of distribution, when the value of the stock has increased to $400,000, due to an acquisition. • Tax consequences: • At distribution? • At death? • To heirs?