Net Unrealized Appreciation (NUA)

Written By
Paul Tracy
Updated November 4, 2020

What is Net Unrealized Appreciation (NUA)?

Net unrealized appreciation (NUA) refers to the difference between the cost of a security or investment and the current market value of that security or investment.

How Does Net Unrealized Appreciation (NUA) Work?

Let's assume Jane purchased 100 shares of Company XYZ for $3 per share 20 years ago. The shares are trading at $100 per share today. Jane's NUA is $100 - $3 = $97 per share, or $9,700. 

note that Jane does not "realize" the value of her investment until she sells the shares. 

Why Does Net Unrealized Appreciation (NUA) Matter?

Notably, a good or service is only worth what someone is willing to pay for it. As such, unrealized gains and losses are little more than numbers on paper -- you can't pay the bills with NUA. After all, the essence of NUA is that the gain is unrealized. That is, the security has not been sold.

NUAs, however, can trigger tax liabilities. For example, when employers give stock to employees, the portion of the value of that stock that is attributable to an NUA is sometimes subject to ordinary income tax or capital gains tax even if the recipient has not actually sold the stock.

NUA is the reason the term "paper millionaire" is significant -- owning 40% of a tech company that is "worth" billions has little impact on the owner's checking account until he or she sells the shares.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Net Unrealized Appreciation (NUA).
Be the first to ask a question

If you have a question about Net Unrealized Appreciation (NUA), then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Net Unrealized Appreciation (NUA), then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Net Unrealized Appreciation (NUA)

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms