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Because theres no particular requirement that the NUA stock be sold immediately (though it often is, for diversification purposes, but could be held for months, years, or even decades thereafter), the NUA gains may be deferred for an extended period of time.
Generally speaking, if you held your shares for one year or less, then profits from the sale will be taxed as short-term capital gains. If you held your shares for more than one year before selling them, the profits will be taxed at the lower long-term capital gains rate.
Additional options and considerations. If you take a lump-sum distribution, even using Form 4972, the retirement plan administrator typically withholds 20% of your withdrawal and sends it to the IRS on your behalf.
NUA may be helpful if used during the income gap years, which generally is a period of lower income that some people experience after leaving work, but before Social Security, pensions, and other income sources commence.
Sale Price. The difference between the purchase price and the sale price represents the gain or loss per share. Multiplying this value by the number of shares yields the total dollar amount of the transaction.
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Net unrealized appreciation (NUA) is the difference between the original cost basis and current market value of shares of employer stock. The IRS offers a provision that allows for a more favorable capital gains tax rate on the NUA of employer stock upon distribution, after certain qualifying events.
Here we answer some of the common questions around taking a tax-free lump sum. Generally, the first 25% of your pension lump sum is tax-free. The remaining 75% is taxable at the same rate as income tax.
Capital gains Theyre usually taxed at ordinary income tax rates (10%, 12%, 22%, 24%, 32%, 35%, or 37%). Long-term capital gains are profits from selling assets you own for more than a year. Theyre usually taxed at lower long-term capital gains tax rates (0%, 15%, or 20%).
Capital gains taxes are owed on the profits from the sale of most investments if they are held for at least one year. The taxes are reported on a Schedule D form. The capital gains tax rate is 0%, 15%, or 20%, depending on your taxable income for the year.
The same rule that 50% of capital gains are taxable also generally applies to securities, such as shares, fixed income securities, mutual fund units, etc. The difference between the purchase price and the sale price is taxable. Certain carrying charges and interest fees may also be deductible.

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