When I retired, I took the Net Unrealized Appreciation (NUA) option to move my company stock to a brokerage account at one of the big three (XYZ).
We are Arizona residents. Arizona is a Community Property state. As Community Property, upon the death of the first spouse, the cost basis for both spouse’s non IRA assets are stepped up to the market value on the date of death. This includes the shares of my company stock in the NUA.
Unfortunately my wife died recently. Following her death, XYZ stepped up the cost basis to the value on her date of death.
NUA rules state the NUA does not receive a step-up. XYZ stepped up the full amount without adjusting for the NUA.
Any appreciation beyond the distribution date of the NUA does receive a step-up.
I need to advise XYZ to adjust the cost basis for tax reporting.
Questions:
- Am I understanding the process correctly?
- Am I calculating the average cost basis of $33.33 / share correctly?
Shares of stock held on date of spouse’s death. | 3,000 |
Value of shares on date of death. (Yahoo Finance = $50.00 / share) | $150,000 |
Net Unrealized Appreciation (NUA) | - $50,000 |
Appreciation in value since distribution of the NUA. (Step-up – For Ref. only) | $100,000 |
Cost basis per share for all shares held on DOD. ($150,000 ÷ 3,000) | $50.00 |
Cost basis per share for the NUA shares held on DOD. ($50,000 ÷ 3,000) | - $16.67 |
Resulting average cost basis per share for any shares sold. ($50.00 - $16.67) | $33.33 |
