Stocks (Options, Splits, Traders)
Question: How do I figure the cost basis of stock that has split, giving me more of the same stock, so I can figure my capital gain (or loss) on the sale of the stock?
A stock split occurs when a company creates additional shares, thus reducing the price per share. If you own stock that has split and now own additional shares, you must adjust your basis per share or per the lots of the stock you own.
If the old shares of stock and the new shares are uniform and identical:
- The basis of the old shares must be allocated to the old and new shares.
- The per share basis is determined by dividing the adjusted basis of the old stock by the number of shares of old and new stock.
If the old shares were purchased in separate lots for differing amounts of money (a different basis per lot):
- The adjusted basis of the old stock must be allocated between the old and new stock on a lot by lot basis.
- Tax Topic 409, Capital Gains and Losses
- Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
Category: Capital Gains, Losses, Sale of Home
Subcategory: Stocks (Options, Splits, Traders)