Your client, Rick House, is retiring later this year. He has been a participant in a profit sharing plan through his employer. There is substantial appreciation of the employer securities within his profit sharing plan account. In order to avoid current taxation on a distribution, Rick decided to roll over the entire account balance to an IRA. Upon a distribution from the IRA, the gain from the shares is

eligible for NUA treatment and is taxed as a long-term capital gain.

eligible for NUA treatment and is taxed as ordinary income.

not eligible for NUA treatment and is taxed as long-term capital gain.

not eligible for NUA treatment and is taxed as ordinary income.