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?
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 does not change as a result of a stock split, but your per share basis changes. You will need to adjust your basis per share of the stock.
- For example, you own 100 shares of stock in a corporation with a $15 per share basis for a total basis of $1,500. In a 2-for-1 stock split, the corporation issues an additional share of stock to the shareholder 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.
- Tax Topic 409 - Capital Gains and Losses
- Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
Category: Capital Gains, Losses, and Sale of Home
Subcategory: Stocks (Options, Splits, Traders)