If I received shares of stock as a dividend, when I sell them is the cost basis $0?

Question

I received 14 shares of stock as a dividend, when I already owned shares from the same company. If I sell 14 shares years later, is the cost basis $0 because I didn't pay for them and they were given to me?

Answer 1

If you received a dividend statement, then check that for the value of the stock when it was received. If the dividend isn't considered income, and I believe it probably wasn't, then your cost would be zero.

It might prove beneficial to check this out with a CPA, but I believe you're correct.

Answer 2

You actually DID pay for them. When a dividend is paid in shares it's just a reinvestment of the dividend. You would have received a statement that detailed the amount of the dividend and the number of shares purchased. With that, your cost per share is pretty easy to figure.

When the dividend is paid, it is taxed as ordinary income unless the dividend was a qualified dividend which would be treated as a long-term capital gain. Whether the dividend is paid in cash or reinvested as new shares doesn't matter. Make sure that you claim that, as well as the gain when you do sell the shares!

Answer 3

I think it depends on exactly how it was paid. If it was like a stock split, where you received extra shares based on the shares you already had, then you would divide your cost basis over both the original shares and the "dividend" shares. For example, if you had 140 shares that you bought for $22 each (a total of $3080) and then you got a 10% stock dividend of 14 new shares, giving you a total of 154 shares, then your cost basis in all shares would be your total cost basis ($3080) divided by the number of shares you had after the dividend/split (154), or $20 each.

If the dividend was in cash and you bought new shares through a dividend reinvestment plan or something similar, then that's a different story. In that case, the dividend was taxable at the time you received it and the amount that was used to buy the new shares will be the cost basis of those shares.

Answer 4

Ah, but you did pay for them. You received a dividend that you paid taxes on (unless it was in a 401k or an IRA). Add the dividend amount to your cost basis.

Answer 5

those words do no longer mean an analogous factor. A "DRIP" is a "dividend reinvestment software". this suggests that any dividends are used to purchase greater shares. rather of receiving a examine for the dividends, you get carry of further shares.