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J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return by J.K. Lasser Institute

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7.10 Distribution of Employer Stock or Other Securities

If you are entitled to a distribution from a qualified plan that includes employer stock (or other employer securities), you may be able to take advantage of a special exclusion rule. If you withdraw the stock from the plan as part of a lump-sum distribution and invest the stock in a taxable brokerage account instead of rolling it over to a traditional IRA, tax on the “net unrealized appreciation,” or NUA, may be deferred until you sell the stock. To defer tax on the full NUA, the employer stock must be received in a lump-sum distribution, as discussed below. If the distribution is not a lump sum, a less favorable NUA exclusion is available, but only if you made after-tax contributions to buy the shares; see below.

Lump-sum distribution.

If you receive appreciated stock or securities as part of a lump-sum distribution, net unrealized appreciation (increase in value since purchase of securities) is not subject to tax at the time of distribution unless you elect to treat it as taxable.

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image Planning Reminder
Deferring Tax on NUA
If you receive a lump-sum distribution that includes appreciated employer securities, you may defer the tax on the net unrealized appreciation (NUA) in the securities.
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For purposes of the NUA exclusion, a lump-sum distribution is the payment within a single year ...

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