How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22754
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I assume that my total income tax for 2012 will be $53,000

Resolved Question:

I assume that my total income tax for 2012 will be $53,000 ($32K+$21K). The $21k represents the 15% capital gain tax on $141,000 when I transferred-in and sold the company stock in my individual brokerage account. I also assume that I am responsible for the ordinary income tax on $116,000 (cost basis of company stock) for transfering the company stock from my 401K to my individual brokerage account. Do you agree with these assumptions?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!

That is a very good idea and you were given a valuable advice.

In some cases, such as for your employer's shares held in the 401k account - distributions qualify as a Net Unrealized Appreciation (NUA) distribution. In this case you are taxed only on the original cost of the company stock in the 401k account, and then pay capital gains tax on the appreciation only when you sell the shares.

You may find additional information and examples about NUA distributions in this article - http://www.tuveinvestments.com/pdf/Retirement/Net%20unrealized%20appreciation.pdf.

 

In your situation - you are correct - if you sell shares in the same year - the gain will be treated as a capital gain.

 

hen - see in the article I referenced above - How stock is taxed

 

Any net unrealized appreciation (the difference between the fair market value of the stock on the date of the distribution and the fair market value as of the date it was contributed to or purchased by the plan) attributable to these securities is not taxed until you sell the stock. Additionally, when the stock is sold, the net unrealized appreciation as of the date of the lump-sum distribution is taxed at the long-term capital gain rate, currently 15%, rather than as ordinary income, which may entitle you to more favorable tax rates on this sum. Any additional appreciation that accumulates after the date of the lump-sum distribution would need to be held for at least a year to be given long-term capital gains treatment.

 

The NUA will be shown on box 6 of the 1099-R but not in box 2A which designates the taxable amount. See Form 1099-R and instructions regarding box 6.

http://www.irs.gov/pub/irs-pdf/f1099r.pdf

Also see page R-9. http://www.irs.gov/pub/irs-pdf/i1099r.pdf

 

If you sell the stock in the same year - you will be subject of AMT - alternative minimum tax ~$5000 - so your total estimated tax liability would be ~$58-59k

 

Let me know if you need any help.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22754
Experience: Taxes, Immigration, Labor Relations
Lev and 6 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.