Did the cost basis of MBNA stock in a 401k plan start new with the buy out of Bank of America?

Question

I am looking for a cost basis for stock we sold in Jan and Dec of 2006

Answer 1

Inside a 401k the only people that are concerned about basis of stock are plan auditors.  And that's only because GAAP requires that all financial statements (even retirement plans) track stock basis.  

However, for plan purposes the basis of the stock is the market value as of 12/31 of the prior year.  Yes, that's what I'm saying...the market value at end of year 1 becomes the cost basis for year 2.  

For individual purposes there is no reason to track basis.  All gains are the same...dividends, realized gain, capital gains...etc   all are considered UNREALIZED until a distribution is made and at that point the entire balance is taxed as ordinary income.  Since it's taxed at ordinary income (at a rate higher than capital gains rate) there is no need to track cost basis.  

Hope this helps.

Answer 2

No.

And unless you just want to know for your own purposes I see no reason to be concerned with cost basis for stock in a 401K account or regular IRA. You still have to pay taxes on an ENTIRE withdrawal as all money was put in tax free to begin with.