NUA - Net Unrealized Appreciation

NUA (in-you-ay): abbreviation for net unrealized appreciation – the difference between the cost basis and current market value of a company shares held within a tax-deferred account. Context: Decisions regarding NUA transactions can be complex as one must balance potential tax benefits with a variety of other considerations including concentration risk and investment strategy.

Disclaimer: This website and its contents are for informational purposes only and does not constitute investment or tax advice. If you are making a decision regarding NUA, you should consult with the appropriate tax and investment professionals.

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Net Unrealized Appreciation (NUA)

If you are an individual making a decision involving net-unrealized-appreciation (NUA) or a professional advising on such a transaction, then you may find this site useful. The basic challenge is to compare the tax benefits of an NUA election to the benefits of rolling the proceeds over into an IRA. Please refer https://www.irs.gov/taxtopics/tc412 for the IRS’s description.

How to use this NUA calculator

The NUA tool here allows you to input details and assumptions relevant to a potential NUA election. It then calculates and compares the after-tax performance of the NUA option versus rolling over the proceeds into an IRA. This includes RMD calculations and related taxes based on your inputs as well as the IRS’s RMD and mortality tables.

Most people in this situation will have shares with varying levels of basis. The goal is typically to determine which shares would be good candidates for the NUA election. Lower basis shares naturally make for better candidates, but this tool can help you determine where to draw the line (e.g., use NUA for shares with a basis lower than $X and rollover the rest into an IRA).

Note: This tool only considers pre-tax holdings and does not address after-tax contributions. This tool provides performance comparisons based on the assumptions one enters, but one should also consider the less quantifiable factors regarding investment performance and concentration risk.

Why use this NUA calculator

The stakes are high! NUA transactions can involve significant sums of money and are generally irrevocable. So it is important to understand all of the relevant details and conduct proper due diligence. In our view, existing online NUA tools are lacking in their attention to detail and do not provide the appropriate analysis for making decisions around NUA. For example, some compare the amount of tax paid, but the real goal should be to maximize after-tax performance.

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