Here’s how the NUA rules generally work:
- If you pull the company stock out of your former employer’s 401(k) plan in a lump-sum distribution, tax is deferred on the NUA until you sell the stock (you still must pay tax on your cost basis at your ordinary tax rate).
- When you do sell the company stock, the NUA is taxed at the rates for long-term capital gain.
- Any gain exceeding the NUA - the gain since taking the stock out of the former employer’s 401(k) plan - is taxed as long-term or short-term capital gain, depending on how long you held the stock after pulling it out of the 401(k) account (short-term gains are taxed at your ordinary tax rate).
Here's a detailed article on Net Unrealized Appreciation to help you.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"