## Stock split effect on cost basis

In a reverse stock split, the issuing company replaces the currently owned shares with fewer shares. Note: Stock splits do not affect a security's total cost basis. The   The tax basis of shares of Liberty Interactive common stock is not affected by the split-off. This is not tax advice. Please note that the information above is provided   If you participated in this stock split with respect to any Allstate shares you received from Sears, the tax basis determined according to the worksheet below will

## 30 May 2015 Knowing how a split or a cash dividend changes your tax cost has important implications for your investments.

I just sold some stock and am now trying to calculate the cost basis of the stock for US tax purposes. Say I bought one share of stock X for \$100, then a stock split occurs so I now have two shares, and then later I sell those two shares for \$150 total (\$75/share). For a split (like 3:2 or 2:1 or 3:1), you increase the number of shares by the split factor, which necessarily reduces the per share cost basis. Suppose that stock you purchased above splits 3:1. Cost Basis After Stock Splits Just as a stock split affects the current stock price, it also affects your original cost basis. Multiplying the split ratio, such as 4:1, by the number of shares you owned before the split calculates the number of shares you own after the split. In a two-for-one split, for example, each share becomes two, and the cost basis is cut in half. Reinvested dividends, on the other hand, are added to the cost basis. Divide the total cost by the number of shares you own after the split to calculate the adjusted cost basis. In the example, \$1,150 divided by 82.5 calculates an adjusted cost basis of \$13.94 per share. Multiply the partial share fraction times the per-share cost basis to calculate its cost basis. Divide your per share basis by the number of new shares you received for each old share in the first stock split. For example, if your stock split five new shares for every old share, divide \$25 by 5 to get a new basis of \$5 per share. Repeat Step 2 for each stock split to calculate your new stock basis.

### As stock splits affect cost basis, it is important that you include this information in your calculations. If you have purchased and sold shares in the open market, you

The tax basis of each share owned immediately after the stock split is equal to one-half of what it was immediately before the split. For example, if you owned  14 Jun 2019 When you sell an investment, calculating cost basis and good record of tax savings is understanding how realized gains and losses impact your taxes. If a company declares a stock split, the cost basis of your old shares is  Simply put, your cost basis is what you paid for an investment, including brokerage fees, for corporate actions such as mergers, stock splits and dividend payments. an investment and potentially minimizing the tax impact of that transaction. pro-rata basis upon completion of a reverse stock split. When is If your shares are held in a brokerage account, you do not need to take any action to effect the.