Hi, I'm new to this softward and am looking for a little insight into how to describe and model net unrealized appreciation of company stock within a profit sharing retirement plan using this software? I searched the instruction and did not see any mention of this. Thanks for the help.
John
Hi John,
Would you please elaborate a bit on how this asset works? I modeled my company stock perk as a taxable windfall on the Income page but there may be a better way, depending on the nature of what you're trying to do. Thanks.
Stuart
John,
I asked a similar question some months ago ("Model 401(k) w/NUA Rollover?", 28-Nov-22) and although no replies I *think* I was able to learn a little about NUA and how to model in PRC.
Some assumptions as I understand things - The opportunity for NUA treatment of tax-deferred Stock holding only applies IF/WHEN distributed from the Company account. Basis of stock value is taxed as Regular Income year of withdrawal, NUA taxed as Capital Gain when, portion or all, stock is sold.
For instance, $2M total SIP with $500k stock value portion which consists of $200k basis and therefore $300k NUA. In PRC, enter Basis of $200k as "Other Income Stream" with Start=Stop year, taxed as Regular Income. Enter NUA of $300k again as "Other Income Stream" but taxed as Capital Gains and Start=Stop year(s) of your choice. $1.5M remainder of SIP value can be treated as "Pension" with Start=Stop year same as Basis and other values as appropriate. Also consider as additional Scenario sell of stock within Plan, if allowed, and Start=Stop year rollover entire $2M without NUA.
Caveats and limitations. After rollover, if NUA modeled for future sale the value will likely change and therefore need to be manually updated. Also AFAIK, PRC does NOT consider capital gains during Roth Conversion analysis - Possible workaround is to consider NUA taxed as regular income with potential related side effects.
A NUA situation is complicated and PRC User Manual a little thin, confusing (to me at least) on some topics such as taxation but Hope this makes sense and I've got most fundamentals of NUA and PRC right. If nothing else, perhaps this will start a discussion and elicit feedback from PRC Users here much smarter than me...
Bob
Thank you Bob for the reply. I got a little busy, sorry for the delayed response. Your reply makes good sense. I think you got most of the nuances about right at least to my level of understanding the tax code. I will give this approach a go. Thanks again!
John
Remember, when pulling the trigger on NUA shares in your 401k, you have to empty the 401k (and any others you may have with the company) completely that year, not just the company shares. You must have left the company, or be over 59 1/2, etc. The shares must transfer to your brokerage in-kind, not be sold and rebought. Make sure you know the rules. If you'll have a low tax bracket in retirement, it might be better to just let them be (or sell as part of the rollover to an IRA if overbalanced in them) and take as regular income or Roth conversions (free growth).
