What happens at tax time if your stock split?

Question

Let's say you owned 4 shares of XYZ corp. The shares are valued at $50 per unit. Total worth is $200 (4 shares x $50). Let's say the stock does a 2 for one split. You now have 6 shares. However, after a split the price goes down per share. Now, it's worth $33.33 per share. Now, let's say you decide to sell one share. Come tax time, how do you list the original buy price and sell price?

Buy = $50
Sell = $33.33

It looks like you lost money but you really didn't.

Answer 1

Taxes for stocks are done on schedule D .
You will list how many shares you sold and the total price you received , then you will list the purchase price for them based on the split adjusted cost basis .
A 2 for 1 split would give you 8 shares for the 4 ,
And the $200 purchase price would now be divided by 8 instead of 4 > the split adjusted price is $25 each .

You will pay taxes on capital gains if the sell price is more than the purchase or it will be a write off if the sell price is less .

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Answer 2

Your intuition is correct. You did not really loose money, and the IRS agrees with you.

Your basis per share is how much you paid in divided by the number of shares it purchased.

When you paid $200 and got 4 shares, you basis was $50/share.

When there was a 1 for 2 split (one new share for every 2 that you owned previously) you ended up with another 2 shares (for a total of 6) but you did not put in any more money. So the adjusted basis per share as far as the IRS is concerned becomes $33.33 ($200/6). Therefore, if you sold at $33.33/share after the split, you would recoginze ZERO gain since the basis equils the amount you received.

Even the IRS can be fair.

I hope that helps.

Answer 3

If you bought a stock at $50 and it splits 2-for-1, the buy price of each stock is adjusted to $25.

Answer 4

when your stock splits 2 for 1 your basis or cost per share is half of the original. $25 in your example

Answer 5

Tax returns don't ask for anything on a per share basis. You put down how much money you put in (your cost basis) and how much money you got out (your sales proceeds) and you take the difference to determine the gain. So, in your example your basis is $200 and your proceeds are $200 -- no loss or gain.

Answer 6

Nothing if you don't sell.

Answer 7

you give half to the IRS.