Cost Basis

[Guest pjb]

When stock is reallocated to participants due to forfeiture, what is the cost basis of those shares?

When participant's purchase stock from their cash side fund due to repurchase obligation resulting from cash distribution to terminated participant, what is the cost basis of those shares?

Thanks

[RLL]

Hi pjb ---

The cost basis of shares of employer stock reallocated or "recycled" within an ESOP remains unchanged so long as the shares are not distributed (or otherwise disposed of) and then reacquired by the ESOP. The basis remains the ESOP's original cost (or acquisition value, in the case of contributed shares); and, if the employer is an S corporation, there will be an annual adjustment to basis to represent the ESOP's share of S corporation income or loss.