Net Unrealized Appreciation (NUA) vs. IRA Rollover

The NUA is important if you are distributing highly appreciated company stock from your tax-deferred employee-sponsored retirement plan, such as a 401(k). Upon the distribution the NUA is not subject to ordinary income tax. For this reason it may be better to transfer the company stock to a regular taxable account instead of rolling the stock over to a tax-deferred IRA: that is, if rolled over to an IRA, the company stock's NUA would eventually be taxed at your ordinary income tax rate (when you take distribution of the stocks).