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

[mbms2018]

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?

[dmertz]

"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.

[mbms2018]

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]

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.

[mbms2018]

Again, thanks.
The 1099-R for the stock distribution from the 401k looks exactly as you described.

I will try to clarify my question with more details.
I will obfuscate the specific numbers by using a value of $100 as the value of the stock distributed from the 401k.

I distributed company stock worth $100 from my 401k into a taxable brokerage account in August 2024.
I sold all of those shares from the taxable brokerage account for $116 in November of 2024.
There was a dividend of $0.01 paid on the stock while it was in the taxable brokerage account.
I expected to pay “straight” income tax on a total of $116.01.

It appears Turbo tax is calculating tax on a 401k distribution of $100 AND a taxable brokerage sale of $116 (and the $0.01 dividend). I can not figure out how to make Turbo Tax use the $100 401k distribution as the cost basis for the $116 taxable brokerage sale. Alternately, maybe I need a corrected 1099-B for my taxable brokerage account.

More Details:

The 1099-R for the 401k distribution showed:
$100 in box 1 (Gross distribution)
$100 in box 2a (Taxable amount)
$0 in box 6 (Net unrealized appreciation in employer’s securities)
7 in box 7 (Distribution code(s))
Box 13 (Date of payment) was blank
Zeros or blanks in all other boxes (with the exception of name, account number etc kind of info.)
[Matches what I expect.]

The 1099-B for the taxable brokerage account showed:
In the “UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS”
$116 in line 1d- Proceeds & 6- Reported (G)ross or (N)et
$0 in Cost or other basis
$116 in Gain or loss(-)
The 1099-B also showed the $0.01 dividend.
[Does not match what I expect since I think the cost basis for the sale from the taxable brokerage should be the $100 from the 401k distribution.]

Again, Turbo tax calculated tax on both the $100 distribution from the 401k
and the $116.01 proceeds from the sale from the taxable brokerage account (and the dividend).

I need some way to get the $100 into the cost basis of the sale from the taxable brokerage account. Can I do this in TurboTax or do I need my brokerage to issue a corrected 1099-B for the sale from the taxable brokerage account?

Thank you for your input!

[dmertz]

"I expected to pay “straight” income tax on a total of $116.01."

That's correct:  $100 taxable distribution from the 401(k), $16 short-term capital gain and $0.01 nonqualified dividend.

Because these are noncovered shares, make sure that you indicate that the cost basis shown on the Form 1099-B is wrong and that the actual cost basis is $100.  The resulting taxable gain will be $16.