How to record an employer stock nua transaction

Jeffrey Kirk

I was a participant in an employer 401k that included company stock.  I elected to terminate (and roll over certain portions of the plan to an IRA rollover acct) in order to get a "stepped up" basis in certain of the employer stock. For example, assume my plan has $1,000 in assets, including $250 of company stock with a cost basis of $30. The IRS will allow me to terminate the plan, and roll over the non-company stock into an IRA, and the company stock into a normal brokerage account (taxable). The benefit is that I will get a "stepped up basis in the company stock equal to the fmv of the stock on the date of termination of the plan, but only by paying taxes on the difference between my basis ($30) and the fmv of the stock ($250). Thereafter, whenever I sell the stock, I will only pay cap gain taxes on the diff between the sales price and the $250, and not ordinary income taxes on the total received. Anyone have any ideas on how to record such a transaction(s)? Q17 Premier, W10.

NotACPA

Establish the taxable brokerage account.
Transfer the stock to the brokerage account at current cost basis
Remove the stock from the brokerage account
Add the stock back to the brokerage account with the new cost basis

Jeffrey Kirk

Thanks.  That sounds easy enough!  Will the combination of the entries result in a taxable gain transaction by Quicken equal to the diff between the fmv of $250 and the "old" basis of $30? That is the "nuance" of the whole transaction, and that which is different from a distribution from a normal 401k acct.

NotACPA

Jeffrey Kirk said:

Thanks.  That sounds easy enough!  Will the combination of the entries result in a taxable gain transaction by Quicken equal to the diff between the fmv of $250 and the "old" basis of $30? That is the "nuance" of the whole transaction, and that which is different from a distribution from a normal 401k acct.

Nope, it won't produce a taxable gain ... because you're removing the stock at the OLD basis, and then adding it back in at the new basis ... and that's not a "taxable gain' in Quicken.

This procedure is similar to donating appreciated stock to a charity.  At the top of the home page here, search for Stock Donation  for a fuller discussion

Unknown

Hope this article will help a little https://www.quicken.com/support/how-do-i-buy-espp-employee-stock-purchase-plan-shares

Jeffrey Kirk

Thanks Exporter, I'll take a look