Net Unrealized Appreciation ( NUA)

Definition

The increase in value of employer securities while they are held in a qualified plan .

The term “securities” means only shares of stock and bonds or debentures issued by a corporation with interest coupons or in registered form.

The term “securities of the employer corporation” includes securities of a parent or subsidiary corporation of the employer corporation.

Referring Cite

IRC §402(e), Treas. Reg. §1.402(a)-1(b), IRS Publication 575

Additional Helpful Information

• NUA is excluded from the income of the participant when the stocks are distributed as part of a lump-sum distribution.
• An exception to the lump-sum rule applies to employer securities purchased in the plan with employee-contributions
• The NUA is included in the participant’s income for the year the employer stocks are sold

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