- Net unrealized appreciation (NUA)
- NUA is the excess of the fair market value (FMV) of your
company stock at the time of the transfer over its cost basis to
the qualified plan's trust. This amount will be taxed when you
eventually sell the stock in your taxable account. Your NUA is
treated as a long-term capital gain, even if you sell your stock
immediately after transfer. Please note that any appreciation above
the FMV of the stock that occurs after your transfer will be
considered a short-term capital gain if you hold onto your company
stock for less than one year. If the stock is held for at least one
year after the transfer, it is then characterized as a long-term
capital gain.
- Balance at time of distribution
- This is the fair market value (FMV) of the company stock, which
will be transferred from your retirement plan.
- Total stock purchases (cost basis)
- This is the total amount you and/or your employer paid for the
stock that you will be transferring. This is also referred to as
the company stock's "cost basis". Your retirement plan
administrator is required to provide you with the amount of your
cost basis. When you transfer company stock to a taxable account
and use the NUA strategy, instead of rolling it to an IRA, you pay
taxes at your marginal income tax rate on the cost basis of the
stock. This means that if the fair market value (FMV) of the
company stock shares within your 401(K) is $1,000, and the total
purchase price is $200 (your cost basis), you would only initially
pay taxes on the $200 cost basis. The cost basis is usually taxed
as ordinary income. Unless you qualify for an exception, there may
be a 10% penalty tax on the cost basis, if both of the following
criteria apply:
- You are younger than age 59-1/2
- You are separated from service, from the employer providing the
retirement plan, prior to the year in which you attained age
55
Please consult with your tax advisor for more details.
- Rate of return
- This is the expected rate of return on your company stock. This
is only used to help project your future account balance and
subsequent taxes. It is important to remember that future rates of
return can't be predicted with certainty and that investments that
pay higher rates of return are generally subject to higher risk and
volatility. The actual rate of return on investments can vary
widely over time, especially for long-term investments. This
includes the potential loss of principal on your investment.
- Holding period
- The number of years and months you expect to hold onto the
company stock, after you have made the transfer.
- Capital gains rate
- This is the tax rate you expect to pay on any long-term capital
gains. The current long-term capital gains tax rates through 2012
are:
- 0% if your ordinary income marginal tax rate is 10% or 15%
- 15% for all ordinary income marginal tax rates greater than
15%
Please note, this calculator does not include the impact of the
Alternative Minimum Tax (AMT) which can increase the effective rate
you pay on capital gains. Please contact your tax advisor for more
information and the possible implications.
- Marginal income tax rate
- This is the tax rate used to determine taxes on your taxable
income. Use the table below to help you determine your marginal
income tax rate.
| 10% |
$0 - 17,400 |
$0 - 8,700 |
$0 - $12,400 |
$0 - 8,700 |
| 15% |
$17,400 - 70,700 |
$8,700 - 35,350 |
$12,400 - 47,350 |
$8,700 - 35,350 |
| 25% |
$70,700 - 142,700 |
$35,350 - 85,650 |
$47,350 - 122,300 |
$35,350 - 71,350 |
| 28% |
$142,700 - 217,450 |
$85,650 - 178,650 |
$122,300 - 198,050 |
$71,350 - 108,725 |
| 33% |
$217,450 - 388,350 |
$178,650 - 388,350 |
$198,050 - 388,350 |
$108,725 - 194,175 |
| 35% |
over $388,350 |
over $388,350 |
over $388,350 |
over $194,175 |
Source: Revenue Procedure 2011-52 http://www.irs.gov
- Expected inflation rate
- What you expect for the average long-term inflation rate. A
common measure of inflation in the U.S. is the Consumer Price Index
(CPI). From 1925 through 2011 the CPI has a long-term average of
3.0% annually. Over the last 31 years highest CPI recorded was
13.5% in 1980.
- Separated from Service At Age 55 or Older
- Check this box if you separated from service, from the employer
providing the retirement plan, in the year you attained age 55 or
later. Under these circumstances, there would be no 10% penalty tax
on the distribution from the retirement plan.
- Retirement Plan Distribution Will Be At Age 59-1/2 or
Older
- Check this box if the retirement plan distribution from the
retirement plan will occur on or after the date you reach age
59-1/2. Under these circumstances there would be no 10% penalty tax
on this, or any future distributions from the retirement plan or
IRA.
- IRA Distribution Will Be At Age 59-1/2 or
Older
- Check this box if the distribution from the IRA will occur on
or after you reach age 59-1/2. Under these circumstances, there
would be no 10% penalty tax on the distribution.
- Present Value
- The amount that a future sum of money is worth today based on
an assumed inflation rate. By discounting future tax distributions
to present values, comparisons between alternatives are placed on a
common basis.
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