Net Unrealized Appreciation (NUA)

A client retires in 2026 and takes a lump-sum distribution of employer stock from her qualified plan. The stock has a cost basis of $200,000 and a fair market value of $750,000 at distribution.

If she elects Net Unrealized Appreciation (NUA) treatment, how will the $550,000 of appreciation be taxed?

1. As ordinary income in the year of distribution
2. As short-term capital gain in the year of distribution
3. As long-term capital gain when the stock is sold
4. As tax-free income