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Under section 72(e), the amount included in gross income equals
the amount distributed to the distributee less the amount of any
investment (i.e., contributions) made by the distributee. Since
petitioner made no contributions to her account, the amount
includable under section 72, in the absence of any exceptions,
would be equal to the total amount of the distribution.
However, section 402(e)(4) provides:
(4) Net Unrealized Appreciation.--
(A) Amounts attributable to employee
contributions.-- * * *
(B) Amounts attributable to employer
contributions.--For purposes of * * * [section 402(a)]
and section 72, in the case of any lump sum
distribution, which includes securities of the employer
corporation, there shall be excluded from gross income
the net unrealized appreciation attributable to that
part of the distribution which consists of securities
of the employer corporation. * * *
(C) Determination of amounts and adjustments.--For
purposes of * * * [section 402(e)(4)(A) and (B)], net
unrealized appreciation and the resulting adjustments
to basis shall be determined in accordance with
regulations prescribed by the Secretary.
(D) Lump sum distribution.--For purposes of * * *
[section 402(e)(4)], the term "lump sum distribution"
has the meaning given such term by * * * [section
402(d)(4)(A)] (without regard to * * * [section
402(d)(4)(F)]).
The phrase "securities of the employer corporation" includes
shares of stock of a parent or subsidiary corporation of the
employer corporation. Sec. 402(e)(4)(E). The net unrealized
appreciation (NUA) in the securities is the excess of the fair
market value of such securities at the time of distribution over
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Last modified: May 25, 2011