@covert-eric The cost basis of the over contribution is the original amount of the excess contribution. For example, lets say you over contributed to your 401(k) by $1,000. Once you realized that you had over contributed the mutual fund that the $1,000 was invest in had gone up 10%. The $1,000 contribution is now $1,100. Not only do you have to withdraw the $1,000 over contribution, you also have to withdraw the $100 of gain. Your cost basis portion of the $1,000 you have to withdraw is $1,000.
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