Maintaining cost basis

[Guest boetgerinc]

We have taken over the administration of a 401(k) plan which offers company stock as an investment option (publicly traded). The prior TPA did not maintain a cost basis on the stock. I believe that I need a cost basis because the plan allows for participants to take distributions in company stock. I also believe that if an employee takes the stock and does not roll it over, they are only taxed on the cost basis until they actually sell the shares. Is there a general formula for me to use so that I can arrive at a cost basis and then calculate it on an ongoing basis ?

Thank you.

[Guest Gary Tencer]

You only need to track the average basis for preparing Form 1099-R. You dont need to keep all the purchase prices and dates for this. After each purchase, you have total shares and total basis.