Stock Distribution and Beneficiary Basis from 401k plan.

[Guest fusiuser]

If a participant leave a 401k plan and had employer stock in it, rolls over the cash portion and takes a distribution of the stock shares what basis does he use for the stock (he is not selling shares- just holding) and when he eventually dies what basis does the beneficiary use? Is there a step-up basis and can you briefly exlpain? I would appreciate any insight.

[Guest Jim Brennan]

The employee can be taxed on the cost basis of the stock - not the market value.

The portion of the value of the stock that was untaxed at distribution will be taxed at death. So the step up is from the date of distribution not the date the stock was purchased.

[Guest [Pat M]]

If the rollover done in kind - cash and share - the original basis is used?