I was sent your question because I asked a similar one and got the following answer:
Beginning on January 1, 1984, New Jersey’s treatment of 401(k) Plan contributions changed. After that date, employee contributions to 401(k) Plans were no longer included in taxable wages when earned. If you made contributions to a 401(k) Plan before January 1, 1984, your distribution will be treated differently than if all the contributions were made after this date.
See page 8 here:
https://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git1.pdf
The first thing is to separate the federal taxes from the NJ state income taxes in your mind. Then look at your actual contributions to the 401K's (or "contributory" IRAs) and what was taxed by whom. The federal gov did not tax most of your 401K contributions unless you went over the annual limit. NJ, apparently, has not taxed them since 1984. If a government taxed your contributions once you should be able to get an offset (basis), but based only on your actual contributions, not the appreciated amounts. I have been using an accountant recently, but my recollection is that TT has Q&A to handle both the federal and NJ state versions of these adjustments to your RMD income. (See "nondeductible contributions to YOUR IRA" for federal; "IRA distribution" in NJ Q&A.)
