Net unrealized appreciation calculator.

Employer stock inside a 401(k) that has risen far above what the plan paid for it can be taxed in two layers if you take it out in kind. The cost basis is taxed as ordinary income in the year of the distribution. The rise since then, the net unrealized appreciation, is not taxed until you sell, and then at long-term capital gains rates. The alternative, rolling everything into an IRA, defers all the tax but makes every dollar ordinary income when it comes out. This calculator puts the two side by side.

How the comparison is calculated

The NUA is the stock value minus the plan's cost basis. In a lump-sum distribution that includes employer securities, section 402(e)(4) excludes the NUA from gross income unless you elect otherwise on your return. The cost basis is taxable in the year of the distribution at ordinary rates, and a 10% additional tax applies to it if you are under 59½ and no exception applies. The calculator applies your ordinary rate to the basis now. When you later sell, the gain up to the NUA is long-term regardless of how long you held the shares, and any gain beyond the distribution value is long-term only if you hold them more than a year after the distribution.

The comparison path assumes you roll the whole amount into an IRA and later withdraw the same sale value, taxed as ordinary income. The tool subtracts the NUA-route taxes from the IRA-route taxes. A lump-sum distribution means the whole balance from all of the employer's qualified plans of one kind is paid within a single tax year, and the payment is triggered by death, reaching 59½, separation from service, or disability for a self-employed person.

If the payer reports NUA in box 6 of Form 1099-R, that is the figure to use, and the cost basis is what remains of the stock's value.

Worked examples (hypothetical figures, real rules)

Over 59½, sell at once. Stock worth $300,000 with a $60,000 cost basis has an NUA of $240,000. At a 24% ordinary rate the basis costs $14,400 now. When sold at $300,000 the NUA is taxed at 15%, $36,000. Total $50,400. Rolling over and withdrawing $300,000 at 24% costs $72,000, so the NUA route saves $21,600 on these rates.

Under 59½. The 10% additional tax applies to the cost basis, adding $6,000 now. Tax due at distribution is $20,400 and the saving shrinks to $15,600.

Stock keeps rising. Hold the shares more than a year and sell at $340,000. The extra $40,000 is long-term gain at 15%, $6,000. The NUA route totals $56,400 against $81,600 for the IRA route.

Mistakes people make

• Rolling the stock into an IRA. That gives up the NUA treatment, since the shares must be moved to a taxable brokerage account to qualify.
• Doing a partial distribution. Only a lump sum from all of the employer's plans of that kind in one year gets the full NUA deferral.
• Forgetting that the basis is taxed now. You need cash for the tax due at distribution.
• Ignoring concentration risk. The tax saving does not make a single stock a safer holding.

Who this is for, and what it does not cover

It suits someone holding appreciated employer stock in a 401(k) and weighing an in-kind distribution. It does not model the net investment income tax separately, state tax on gains, losses below your cost basis, the election to include NUA in income, deductions, the time value of tax deferral inside an IRA, or other assets in the same plan. Plans differ in how they report the basis, so check the 1099-R before you decide.

Sources

Retrieved 2026-10-26. Each link was opened and checked against the claim next to it.

• 26 U.S.C. 402(e)(4): net unrealized appreciation in employer securities: section 402(e)(4): NUA exclusion, the election out and the definition of a lump-sum distribution.
• IRS Topic no. 412: Lump-sum distributions: the lump-sum definition and NUA reported in Form 1099-R box 6.
• IRS Publication 575 (2025): Pension and Annuity Income: basis in employer securities, long-term treatment of gain up to NUA and the rollover rule.
• IRS Topic no. 558: Additional tax on early distributions from retirement plans other than IRAs: the 10% additional tax and its exceptions.