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Capital Gains From Retirement AccountsCapital Gains From Retirement Accounts

Best options for a client receiving distributions that include employer stock with net unrealized appreciation

Christopher R. Hoyt, Professor of Law

May 18, 2016

16 Min Read
Capital Gains From Retirement Accounts

Usually, a distribution from a qualified retirement plan is taxed as ordinary annuity income.1 However, a special rule applies when appreciated employer securities are received in a lump sum distribution from an employer retirement plan, such as from an Internal Revenue Code Section 401(k) plan or an employee stock ownership plan. The net unrealized appreciation (NUA), which is the growth in the value of the employer stock while it was held by the qualified retirement plan, is excluded from income in the year of distribution.2 The retirement plan administrator will inform the recipient of the amount of the NUA on Form 1099-R. The NUA amount will be taxed as a long-term capital gain (LTCG) whenever the stock is sold, even if the stock is ...

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About the Author

Christopher R. Hoyt

Professor of Law, University of Missouri

Christopher R. Hoyt, JD is a Professor of Law at the University of Missouri Kansas City School of Law where he teaches courses in the area of federal income taxation and business organizations.  Previously, he was with the law firm of Spencer, Fane, Britt & Browne in Kansas City, Missouri.  He received an undergraduate degree in economics from Northwestern University and he received dual law and accounting degrees from the University of Wisconsin.

Professor Hoyt has served as the Chair of the American Bar Association’s Committee on Charitable Organizations (Section of Trusts and Estates) and is on the editorial board of Trusts and Estates magazine. He is an ACTEC fellow, has been designated by his peers as a “Best Lawyer”, and was elected to the Estate Planning Hall of Fame by the National Association of Estate Planners & Councils.  He is a frequent speaker at legal and educational programs and has been quoted in numerous publications, including The Wall Street Journal, Forbes, MONEY Magazine, The New York Times and The Washington Post