How do I report stock acquisition date for stock transferred from a qualified employee retirement plan when the stock is sold or gifted?

[roycotcamp]

When stock is acquired over a 30+ year period in a qualified employee retirement plan and then distributed to a taxable account, how is the acquisition date determined?

[dmertz · Accepted solution]

If the stock that has been distributed from the qualified retirement plan is employer stock to which NUA (Net Unrealized Appreciation) treatment has been applied, the acquisition date of the NUA portion is deemed to be 18 months prior to the date of distribution, making the NUA portion a long-term capital gain.  With regard to any growth after distribution, the acquisition date is the date of the distribution from the qualified retirement plan.

If this is not NUA stock, the acquisition date is the date of the distribution from the qualified retirement plan.

[roycotcamp]

This sounds good.  Can you provide a reference?

[roycotcamp]

dmertz replied to my comment but my internet went down and I lost the reference reply

[mesquitebean]

@dmertz  will probably automatically see your followup question in this thread on Thursday, but I've also sent him a message to return when he next logs in, just in case

Thanks, dmertz!

[dmertz]

Regarding the holding period for NUA stock, see IRS Notice 98-24:  <a rel="nofollow" target="_blank" href="http://www.irs.gov/pub/irs-drop/not98-24.pdf">http://www.irs.gov/pub/irs-drop/not98-24.pdf</a>

For non-NUA stock, taxes will have been paid on the entire taxable amount of the distribution (usually the entire distribution), as if the stocks were sold by the qualified retirement plan and repurchased by the plan participant at that time, resetting the beginning of the holding period to the distribution date.  (Also, the cost basis becomes the NAV on the date of distribution.)  All appreciation will be appreciation that occurred after distribution.  I've found numerous Private Letter Rulings where the IRS has stated that the holding period for the appreciation that occurs after distribution begins on the date of distribution, but I haven't found an IRS Notice or Rev Proc stating this.

Also, when stock is gifted, the holding period for that stock transfers to the recipient.