Discussion Archives:EOSP & NUA for NOT separated employee

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Discussion Forum Index --> Advanced Tax Questions --> EOSP & NUA for NOT separated employee

Discussion Forum Index --> Tax Questions --> EOSP & NUA for NOT separated employee

Foxclove (talk|edits) said:

18 January 2008
Section 402(e)(4) may provide a tax advantage for individual that hold company stock in a qualified retirement plan. From the tax planning point-of-view the stock basis, current value and individual tax situation all need to be considered. From the qualification requirements and tax prep point-of-view there are a couple of questions:

An individual (over 59.5) is still employed, she takes lump-sum distribution of the full balance of her plan, taking an in-kind distribution of employer stock and rolling over the remainder into an individual IRA. Although her plan balance goes to zero immediately after the distribution, she is still employed and later in the year the balance grows due to employer contributions. Hence at year-end her balance isn't zero. Does she quality for NUA treatment and only pay tax on the basis of the distributed employer stock?

If allowed, will the above situaution create special reporting issues (i.e. 1099-R) that could lead to preparation errors?

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