{"id":189,"date":"2010-08-10T13:32:34","date_gmt":"2010-08-10T17:32:34","guid":{"rendered":"https:\/\/blog.bradpine.com\/?p=189"},"modified":"2014-02-12T10:58:48","modified_gmt":"2014-02-12T15:58:48","slug":"your-company-stock-net-unrealized-appreciation","status":"publish","type":"post","link":"https:\/\/blog.bradpine.com\/2010\/08\/10\/your-company-stock-net-unrealized-appreciation\/","title":{"rendered":"Your Company Stock & Net Unrealized Appreciation"},"content":{"rendered":"

\"\"<\/a>Both companies and employees can benefit from company stock purchases in 401(k) or other qualified retirement plans. But what should an investor do with these shares upon a job transition? You may have heard that you should avoid having too much of one stock in your portfolio, or that it\u2019s beneficial to take advantage of a strong appreciation or low cost\u00a0basis to lock in gains, or perhaps you\u2019re concerned about future taxes on the potential growth of your company shares. This month I\u2019ll introduce you to the Net Unrealized Appreciation strategy, which can be useful in meeting these objectives.<\/p>\n

In general, when you purchase stock in a taxable brokerage account and hold it for over a year, any appreciation in the stock\u2019s value is taxed at long-term capital gains rates. However, when you purchase and hold your company\u2019s stock in a 401(k) account, this doesn\u2019t apply. While growth is tax-free, your eventual distributions, which include any gains from appreciation in your company stock, are taxed at your income tax rate at the time of distribution. The same holds true if you roll over your holdings into a Rollover IRA account. In other words, your company stock is treated like any other holding in your retirement account: you don\u2019t pay income taxes on contributions, but you do pay income tax on any distributions.<\/p>\n

The Net Unrealized Appreciation (NUA) strategy allows investors to pay capital gains tax on appreciation rather than income tax. It involves separating your company stock from the rest of your retirement assets by transferring some or all of the shares to a taxable brokerage account. You pay income tax on the cost per share at the time of this transfer, but when you subsequently sell the shares you would be subject only to capital gains taxes on their appreciation, even if you sell one day after the transfer.<\/p>\n

For example, suppose you have shares of company stock in your retirement plan currently valued at $500,000, and you bought these shares for $50,000. If you were to transfer all of your holdings to a taxable brokerage account, you would pay income taxes on the $50,000 purchase price. The remaining $450,000 would be considered net unrealized appreciation<\/em>, as you have yet to realize the gain through a sale. If you were to sell your holdings, the $450,000 appreciation would be taxed at long-term capital gains rates. On the other hand, if you were to hold onto the shares and they appreciate another $100,000, you would pay long-term capital gains tax rates on the original $450,000 in appreciation and either short- or long-term capital gains rates on the $100,000, depending on how long you hold onto the shares once they\u2019re in your new account.<\/p>\n

This strategy is best suited for investors who have a very low cost basis in their company shares or are age 55 and older. Holding onto a portion or all of the shares over a longer period after the transfer is suitable for those investors who believe their company will grow in the long term and are confident that capital gains tax rates will remain lower than income tax rates.<\/p>\n

Of course, while this may be a great strategy for some, there are several issues to keep in mind. Most importantly, the appreciation or depreciation of your company shares is uncertain. Secondly, future tax rates on income and capital gains are impossible to predict.\u00a0 Finally, if you are under the age of 55, transferring your company stock to a taxable brokerage account upon leaving your job would also generate a 10 percent penalty on the purchase price of the shares, making this a riskier strategy for younger savers.<\/p>\n

While one of my specialties is IRA Rollovers, this is an issue that can become complicated very quickly. As such, I strongly recommend that you speak to a tax advisor about this strategy to ensure that it fits with your overall goals and needs.<\/p>\n

Here is more detailed information\u00a0on\u00a0Net Unrealized Appreciation <\/span><\/a>.<\/p>\n

If you are seeking detailed\u00a0information about rolling over your 401(k) or about managing your IRA, I highly suggest downloading my free eBook, \u201c10 Tips You Need to Know About Your IRA Rollover\u201d. <\/a>This short book is packed with critical information that will help you make the right decisions about your retirement savings.<\/p>\n","protected":false},"excerpt":{"rendered":"

Both companies and employees can benefit from company stock purchases in 401(k) or other qualified retirement plans. But what should an investor do with these shares upon a job transition? You may have heard that you should avoid having too much of one stock in your portfolio, or that it\u2019s beneficial to take advantage of […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[3],"tags":[22,18,23,1100,24,15],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2p1nA-33","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":2582,"url":"https:\/\/blog.bradpine.com\/2016\/07\/29\/building-additional-income-in-your-portfolio-how-to-invest-in-preferred-stocks\/","url_meta":{"origin":189,"position":0},"title":"Building Additional Income in Your Portfolio: How to Invest in Preferred Stocks","author":"Bradford Pine","date":"July 29, 2016","format":false,"excerpt":"With interest rates so low for so long, I\u2019ve fielded a number of calls from clients looking for ideas for additional income\/dividends. The question is always the same: where to find it? Depending on the client, preferred stock can be a great asset class to complement the right portfolio, but\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2016\/07\/Bradford-Pine-Wealth-Group-Garden-City-New-York-Wealth-Advisor-Preferred-Stock-300x200.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":649,"url":"https:\/\/blog.bradpine.com\/2011\/02\/28\/covered-call-options-simply-understood\/","url_meta":{"origin":189,"position":1},"title":"Covered Call Options: Simply Understood","author":"Bradford Pine","date":"February 28, 2011","format":false,"excerpt":"Have you accumulated a significant position in a single company\u2019s stock, either through your employer or a major investment? Have you been considering ways to diversify your holdings away from one of your big winners? Are you seeking to retire soon and looking to reallocate large equity positions in your\u2026","rel":"","context":"In "Covered Call Options"","block_context":{"text":"Covered Call Options","link":"https:\/\/blog.bradpine.com\/category\/covered-call-options\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2011\/02\/options1-300x267.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":2642,"url":"https:\/\/blog.bradpine.com\/2017\/05\/02\/should-you-consider-a-covered-call-strategy-in-your-portfolio\/","url_meta":{"origin":189,"position":2},"title":"Should You Consider a Covered Call Strategy in Your Portfolio?","author":"Bradford Pine","date":"May 2, 2017","format":false,"excerpt":"Several years ago (time flies!), I wrote an in-depth article about selling covered calls for a group of clients who wanted to know more about the strategy. Since then, I\u2019ve had a number of conversations about it with investors looking to generate income from their portfolios or possibly unwind large\u2026","rel":"","context":"In "Covered Call Options"","block_context":{"text":"Covered Call Options","link":"https:\/\/blog.bradpine.com\/category\/covered-call-options\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2017\/05\/bradford-pine-wealth-group-garden-city-new-york-wealth-advisor-covered-call-strategy-covered11.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":2472,"url":"https:\/\/blog.bradpine.com\/2015\/06\/03\/2-reasons-to-have-dividend-paying-value-stocks-in-your-portfolio\/","url_meta":{"origin":189,"position":3},"title":"2 Reasons to Have Dividend-Paying Value Stocks in Your Portfolio","author":"Bradford Pine","date":"June 3, 2015","format":false,"excerpt":"It\u2019s no surprise that I\u2019m a big proponent of diversification and having many different asset classes in my clients\u2019 portfolios. Diversification is useful for a reason: it gives you the chance to participate in the growth of different asset classes while hopefully minimizing the risk that a downturn in one\u2026","rel":"","context":"In "Individual Investors"","block_context":{"text":"Individual Investors","link":"https:\/\/blog.bradpine.com\/category\/individual-investors\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/img.youtube.com\/vi\/6RwE-Gw_E-s\/0.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2122,"url":"https:\/\/blog.bradpine.com\/2013\/05\/31\/my-personal-experience-at-career-day-making-investing-fun-for-your-children\/","url_meta":{"origin":189,"position":4},"title":"My Personal Experience at Career Day: Making Investing Fun for Your Children","author":"Bradford Pine","date":"May 31, 2013","format":false,"excerpt":"I was recently asked to speak to my son Clay\u2019s 8th grade class for Career Day. I was excited to get the chance to educate the kids and motivate them to save and invest, but I realized when I arrived that I had my work cut out for me, as\u2026","rel":"","context":"In "Youth Investing"","block_context":{"text":"Youth Investing","link":"https:\/\/blog.bradpine.com\/category\/youth-investing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2506,"url":"https:\/\/blog.bradpine.com\/2015\/07\/22\/sabotaging-your-retirement-download-my-free-ebook-10-tips-you-need-to-know-about-your-ira-rollover-2\/","url_meta":{"origin":189,"position":5},"title":"Sabotaging Your Retirement? ~ Download My Free eBook \u201c10 tips you need to know about your IRA rollover\u201d","author":"Bradford Pine","date":"July 22, 2015","format":false,"excerpt":"I\u2019ve written a free eBook called \u201c10 Tips You Need to know about your IRA Rollover,\u201d and if you\u2019ve ever wondered what to do with your retirement savings you might want to take a look! It\u2019s a comprehensive, plain-English guide that can help you to understand the options and take\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2015\/07\/ebook-Suit1-300x200.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/189"}],"collection":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/comments?post=189"}],"version-history":[{"count":0,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/189\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/media?parent=189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/categories?post=189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/tags?post=189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}