exam2handouts Flashcards
(33 cards)
What does NUA stand for?
Net Unrealized Appreciation
NUA refers to the increase in the value of company stock held in a 401(k) plan that has not yet been realized through a sale.
What option do you have when leaving a company regarding your 401(k) stock?
Direct Rollover into an IRA
You can choose to roll over your 401(k) funds into an Individual Retirement Account (IRA) when you leave the company.
What can you do with employer stock in your 401(k) upon retirement under NUA rules?
Roll only the stock into a taxable brokerage account
This allows for potential tax advantages on the appreciation of the stock.
What happens to the rest of the 401(k) funds if you roll over the stock to a brokerage account?
The rest can go into an IRA
This allows you to still manage your retirement funds while taking advantage of NUA.
What tax will you pay on the cost basis of the employer stock when using the NUA strategy?
Ordinary income tax
The cost basis is the original value of the stock, which is taxable as ordinary income.
What tax treatment does the remaining spread of the stock receive when sold?
Long-term capital gains tax treatment
This applies to the difference between the cost basis and the current market value at the time of distribution.
What is the definition of net unrealized appreciation?
The difference between the original cost of the stock and the current market value
This value represents the increase in stock value that has not been realized through a sale.
What is the income limitation on the deductibility of traditional IRA contributions? What is it for a Roth IRA for singles?, couples?
The income limitation on the deductibility of a roth ira for singles is $150,000, and for couples it is $236,000
when does the 5 year clock on Roths start?
After the first deposit
after 5 years roth contributions can be used for what?
any purpose
until what age does growth from roth contributions need to remain in the account to be tax free?
59.5yrs
basics of how a Roth IRA works?
-RMD at age 73
- beneficiaries taxed if inherited
-spouse simply takes over ownership
when should an individual open a Beneficiary IRA and have 10 years to take the money out?
if no spouse to take pre-tax investments
what do permissible alternatives for IRA Custodian purposes include?
self-directed IRAs, banks, mutual funds, IRAnnuity at an insurance company. IRA umbrella can move around without tax consequences
What is an IRA trustee to trustee transfer?
retirement plan rollover with 60 day window
Roth conversions?
you pay ordinary income taxes on the amount converted. No income limitations on conversions.
moves within 401ks and 403bs must stay within the plans allowable options until ______?
retirement
Lump Sum Distribution options?
Direct rollover into Traditional IRA or Roth IRA
Roth 401k money would be directly rolled over into a what?
Roth IRA
what should someone who is renting property do
buy the weakest house in the neighborhood and flip it. Depreciation allows a positive cash flow but shows a loss on tax return. When property is sold the seller must recapture the depreciation as income.
what is Step-Up in basis?
ajdusts inherited assets value to conform to its fair market value for tax purposes upon the decendents death
- reduces capital gains tax burden on inherited property
“when property or investments are inherited the IRS resets the market value to the value on the date of the original owners death, when heir sells, capital gains taxes applied based on the reset value.
529 plan basics
- after tax contributions
-growth is tax deferred
-growth becomes tax free if used for college funding - IN 20% credit for first 7500 contributed per year
gross total estate but not probate?
TODs & PODs
2 estate packages people usually have
Will/Durable Power of Attorney/Health Care POA/ Advance Directive Living will
or
Revocable Living trust/pour over(possibly probated) Will/POA/HCPOA/Living Will
