401(k) rollover – NUA
Doing some work with a client whose 401(k) contains a considerable amount of highly appreciated company stock that was contributed by the company in lieu of a cash match. I understand the “basis’ of the contributed stock is its value on the date of the contribution, but since being contributed, those shares have split. So, what value is placed on those shares created by the split? Would it be the value of those shares, created by the split, on the date of the split?
Permalink Submitted by Alan - IRA critic on Tue, 2016-05-17 17:31
The company must keep track of the cost basis adjusted for splits and/or dividend reinvestments. For a 2 for 1 split, the cost basis per share would simply be divided by 2 to get the new adjusted average cost basis per share at the time of the split. This is the same as adjusting every purchase price up to the date of the split by the same factor which some plans that keep track of the cost basis of certain lots of company shares would have to do to get the updated cost basis of the different lots. Of course, the NUA per share would be the FMV of each share less the newly adjusted cost basis.