When using NUA to withdrawal your company stock ‘in-kind’, your income tax rate only applies to the amount you paid for the stock (your cost-basis). This is NOT the case with appreciated company stock when it distributed in-kind. Normally, distributions from tax-deferred retirement accounts are taxed as ordinary income. Net unrealized appreciation is the gain you’ve accumulated on your company’s stock while it’s been in your retirement account.įor tax purposes, the IRS treats appreciated company stock held in a retirement plan very favorably. If you hold shares of your employer’s stock in a qualified retirement plan, distributing those in-kind allows you to take advantage of any net unrealized appreciation. One of the most well-known examples of this is Net Unrealized Appreciation (NUA). There are some cases when taking an in-kind distribution will result in more favorable tax treatment than taking the distribution in cash. Tax savings with NUA (Net Unrealized Appreciation) The reasons for choosing to take an in-kind distribution can vary drastically, but here a few of the most common: 1. Reasons to consider an in-kind distribution over cash

Other tax-advantaged retirement accounts that allow for in-kind distributions include: The taxable value of the in-kind distribution is determined by the current fair market value of the investment holdings that are being taken in-kind. Just like a cash distribution, in-kind distributions from traditional IRAs are fully taxable. For a traditional IRA, this will typically be a distribution of stocks, bonds, mutual funds, or ETFs. Yes, IRA distributions can be made in-kind.

More simply put, it’s any distribution NOT made in cash.Ī distribution in-kind can be made in several different situations, including a stock dividend, inheritance, or taking securities out of a tax-advantaged account. How to Take An In-Kind Distributions from Your Retirement AccountĪn “in-kind” withdrawal is a distribution made in the form of unsold securities (investments) or other property, rather than in cash.

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