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Stocks (Options, Splits, Traders)

Question: Do I need to pay taxes on the additional stock that I received as the result of a stock split?

Answer:

No.  In a stock split, the corporation issues additional shares to current shareholders, but your total basis does not change.  Following a stock split, you must reallocate your basis between the original shares and the shares newly acquired in the stock split.

  • Stock splits do not create a taxable event; you merely receive more stock evidencing the same ownership interest in the corporation that issued the stock.  You do not report income until you sell the stock.
  • Your overall basis is not changed as a result of a stock split, but your per share basis is changed. You will need to adjust your basis per share of the stock.
  • For example, you own 100 shares of a corporation with a $15 per share basis, for a total basis of $1,500.  In a 2-for-1 stock split, every shareholder is issued an additional share of stock for each share the shareholder owns.  You now own 200 shares, but your total basis is still $1,500.  Following the stock split, you must reallocate your basis between the original shares and the shares newly acquired in the stock split.  Your basis per share is now $7.50 ($1,500 divided by 200) for each of the 200 shares.

Additional Information:


Category: Capital Gains, Losses and Sale of Home
Subcategory: Stocks (Options, Splits, Traders)

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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