1 / 12

Session 7 NUA Fundamentals and Keogh Contributions

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Retirement Planning & Employee Benefits. Session 7 NUA Fundamentals and Keogh Contributions. Session Details. Net Unrealized Appreciation (NUA).

madaline-leon
Download Presentation

Session 7 NUA Fundamentals and Keogh Contributions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 7NUA Fundamentals and Keogh Contributions

  2. Session Details

  3. Net Unrealized Appreciation (NUA) • NUA treatment is available for any employer stock distributed from a qualified plan • Stock bonus, ESOPs, 401(k) profit sharing, are all qualified plans, so the NUA rules would apply • An advantage of NUA is that it is taxed as a long-term capital gain, not as ordinary income

  4. NUA Example Josephine, age 53, takes a distribution on March 1, 2014, of 3,000 shares of company stock. Her cost basis is $65,000 (the amount of employer contributions) and the stock is worth $255,000 when distributed. She sells all 3,000 shares on July 15, 2014, for $270,000. Ramifications are: • $65,000 taxed as ordinary income, and subject to 10% penalty tax • $190,000 NUA taxed as a long-term capital gain • $15,000 additional gain taxed as a short-term capital gain (if held for more than one year from distribution date, then any additional gain would be long-term)

  5. NUA Example

  6. NUA Tax Implications

  7. Keogh Plans—Basic Provisions • Available only to unincorporated businesses—sole proprietor or partnership • Takes the form of a qualified plan (defined contribution or defined benefit) • Certain provisions for owner/employee are unique to Keoghs: • Owner/employee’s contribution is calculated on net earnings • Lump-sum distribution treatment is not available to owner/employee for separation from service before age 59½—available only for death, disability, or attainment of age 59½

  8. Calculation of Maximum Deduction for Keogh Plan Contribution

  9. Calculation of Maximum Deduction for Keogh Plan Contribution

  10. Calculation of Maximum Deduction for Keogh Plan Contribution

  11. Practice Problem • Jane Momeyer is a financial planner who grossed $200,000 this year. Her expenses including the plan contribution for her staff were $130,000. Her profit sharing contribution for her staff was 10% of compensation. How much can she contribute to the profit sharing plan for her own account?

  12. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 7End of Slides

More Related