Thread regarding Chevron Corp. layoffs

I think your sarcasm meter is broken dipshit.

NUA can never be negative. Don’t think like an entitled millennial. Just like in many financial situations, including the IRS tax return and schedules, credits will get you lower, but not lower than zero. Same thing with NUA. Enough schooling for you youngsters for one day.

I would not have guessed there was anyone stupid enough to voluntarily BUY stock in the company that employed them, especially Chevron.

What if your NUA is negative? Do you get a check back from the government?

The Net Unrealized Appreciation (NUA) treatment is only amounts to the difference between the capital gains tax rate and ordinary tax rate. Is that really such an advantage to you, that you don’t touch your CVX stock, you never sell when it’s high and get back in when it’s low? Sitting on Chevron stock in your 401k throughout your career while the value sinks and doesn’t keep up with the broad markets is a detriment to you. The small tax advantage of the NUA tax treatment is far below the advantage of trading your portfolio holdings at the appropriate times throughout your career. I never minded this small tax strategy and sold and bought CVX through my 29 year career. The actual gains in my portfolio far outweigh the small tax savings the NUA could have given me.

• Applies to all company stock in a 401k / ESOP and must be moved, not sold and repurchased.
• You must distribute all value from your 401k at one time. You move the Pretax company stock to a brokerage account in this strategy, and any other pretax value and any Roth/Aftertax value to different accounts (IRAs, brokerage accounts, etc) depending on your preference.

2 Questions:

• Does NUA apply only to CVX ESOP or all of CVX Common and ESOP?
• Does any distribution from 401k (non- CVX Stock) trigger the event when timing to do NUA or can it be timed to only involve CVX ESOP or ESOP and Common.

I heard that there are plenty of Retirement forums on the interwebs. just click click click, its easy peasy man, Duheeeee.

It depends on your cost basis, and many long-timers have a relatively low basis and most people did not buy all their company stock over the last few years in 100+ range.
Don't know what exactly your generalized point is without understanding of someone's cost basis. Also, the S&P does crush a stock as it is an index. Tax savings are reduced by lower capital appreciation with the NUA strategy, but still presents a savings opportunity, again dependent upon your cost basis. You appear to have nothing of significance to add to this thread, so just read and try to understand as a financial option for yourself in the future.

NUA strategy has not worked out well for Chevron stock. Has been crushed by the S&P. Tax savings are dwarfed by the loss in capital appreciation.

Using the NUA strategy allows you to defer and eventually pay lower tax (capital gain vs ordinary income tax) on the appreciation on your company stock when you eventually sell it. You will still have to pay ordinary income tax on your pretax distribution up to the cost basis of the company stock, but you can save on the appreciation component via the difference in the two tax rates, and that can be quite significant.

Because rolling them into an IRA means that when withdrawn they will be subject to normal income tax rates which could vary in any one case from 0-38%.. NUA treatment, if properly done, will tax them at the 15% dividend rate.

Excuse me for a stupid question, but I am confused by this discussion: Why would you not want to just roll your whole lump directly into an IRA?

Can you offset the capital gains with any accumulated capital loss carryover?

OP
IMHO, NUA is worth a look at; has both some nice upsides and some possibly nasty downsides. NUA option best if current values of stock is at least 2.5 to 3 times your cost basis. You also have to do NUA on all of the company stock, you can’t do partial NUA.

Lots of help available if you google “paying zero federal income tax.”

Possible calculation for married couple living in a zero state income location.

Let’s say you have 10,000 shares with current value of $120/share for a total of $1.2 million and your cost basis is $40/share for total of $400,000.

1st year NUA means you have to pay ordinary income tax on that deferred tax income of $400,000, let’s say $120,000 in tax. Note that the cash has to come from another account, you can’t use the stock sale to pay the taxes. Anyway for 1st year you now have $280,000 to survive on and you now have $800,000 of stock in a taxable account Where you only pay long-term capital gains taxes when you sell. Also any appreciation is going to be taxed at long-term capital gains rate.

If you and your spouse can live on a total of $105,000 per year you can pay ZERO federal tax each year. If you earn $25,000 of ordinary income and take out $80,000 from the stock account each year, you pay no federal taxes given that the standard deduction for married couple is $25,0000 and your long-term capital gains rate is ZERO for a total of $80,000.

Assuming no growth in the account, you have 10 years of paying ZERO federal taxes while making $105,000 per year.

Even if you take more capital gains than $80,000 in a year, the capital gains rate is only 15% for up to $240,000 per year.

And remember you have $280,000 cash starting from the 1st year.

Note that numbers are rounded a bit but not materially wrong.

Also, it gets more complicated once you start taking Social Security as calculation of taxes on SSI use different formulas.

The other downside of NUA is that it’s a real bummer if the stock goes to c-ap, as you’ve given the diversification mantra not much heed.

Another upside of the above is that minimizing taxable income can save you a boatload of of $’s once you go on Medicare.

I’m still doing spreadsheets on it to figure out my best options after 40 years in upstream O&G, 25 years with Chevron.

Good luck. Get a good financial (fiduciary) advisor!

You can stretch the income recognition out 6 years by filing the necessary election (form).

Unless you need the $ now, defer recognition (and taxability) until later years.

PS it's a nice "problem" to have :)