correct the cost basis for sale of company stock from a taxable/non-retirement brokerage account after a transfer from from a 401k plan.

Forum|Forum|1 year ago
April 13, 2025
1 reply
0 views

I need to correct the cost basis of a sale of company stock from a taxable/non-retirement brokerage account after a transfer of company stock from a 401k plan.

I terminated my 401k plan that contained company stock in August of last year.
I intended to use the NUA treatment for the company stock, so I distributed the company stock from the 401k to a taxable/non-retirement brokerage account.
I sold the company stock from the taxable/non-retirement brokerage account in November.
I missed the deadlines for the NUA treatment, so I know I need to pay taxes on the full amount of the stock I sold in November.

I received a 1099-R from the 401k administrator showing a taxable distribution equal to the value of the company stock distributed from the 401k to the taxable/non-retirement brokerage account in August.
I also received a 1099-B from the taxable/non-retirement brokerage administrator for the full amount of the sale in November, with a $0 cost basis.

When I uploaded the two 1099 forms into TurboTax it calculated taxes on the full amount of the distribution from the 401k to the taxable/non-retirement brokerage account and the full amount of the sale of the stock from the taxable/non-retirement brokerage account (cost basis=$0).

The cost basis of the sale from the taxable/non-retirement brokerage account should be the amount of the distribution from the 401k to the taxable/non-retirement brokerage account. How do I correct this in Turbo Tax?

Technical Help

dmertz

Employee

"I missed the deadlines for the NUA treatment"

What do you mean by this? The only way to have "missed the deadline for NUA treatment" is to have failed to meet the requirements for this to be a lump-sum distribution. If the plan did not report on the Form 1099-R anything in box 6, that would imply that the distribution did not meet the requirements of a lump-sum distribution.

If the distribution does not qualify as a lump-sum distribution or you choose to not to treat the distribution as a distribution of NUA, the distribution must be reported as an ordinary distribution from the 401(k) and your basis in the shares will be short-term basis equal to the value of the shares on the date of the distribution. The brokerage should have reported this a a distribution of short-term noncovered shares and generally would leave box 1e blank rather than putting a zero in box 1e. When entering this Form 1099-B into TurboTax, indicate that that the amount in box 1e is incorrect of blank and TurboTax will ask you to enter the actual cost basis.

mbms2018Author

Thanks for the response.

I missed the deadline since I did not get the entire 401k closed in the 2024 tax year.

Part of it was closed in 2025; I thought I had a calendar year.

That's what I got for being my own "tax advisor" for this literally once in a lifetime event!

I will try your suggestion later in the day.

Thanks again!

dmertz

Employee

Yes, that is a failure to meet the requirement that it be a lump-sum distribution. In that case, the Form 1099-R should not have anything in box 6, no distribution of NUA, just an ordinary distribution of the shares which gives the shares a cost basis a short-term cost basis equal to the shar value on the date of the distribution, reflected in the gross-distribution amount.