The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Stock split||Date: 1/19/1999 6:46 PM|
|Author: TMFTaxes||Number: 8583 of 122579|
[[I've held some stocks for awhile and they have split. ]]
[[I am thinking of selling half
of them, but not sure how to figure what capital gains base price I would use.]]
I'll try and help you out...
had 100 and now have 200. Lets just say I paid 25 a share. Would I use half of
this amout or take all the original price off the first 100 sold, making the 100 left,
100% capital gains at their time of sale at a later date?]]
Nope...it doesn't work like that at all. Your original basis was 100 shares at $25/share...for a total cost basis (ignoring broker costs and commissions) $2,500. When you received your additional shares, you were required to spread your total basis over ALL of the shares that you now own.
So your new "per share" basis is computed by taking your $2,500 cost basis, and dividing by 200 shares. That will give you a $12.50 basis for each and every share. So if you sell any shares, they will have basis.
[[And after doing this what
would I do if these should split again after doing this?? ]]
Let's look. Lets say that you didn't sell anything, and they now split 2:1 again. Now you have 400 total shares. Take your total basis of $2,500 divided by your 400 total shares, and you have a per share basis of $6.25.
And you keep "spreading" as the stock keeps splitting. Get it?? And, not only that, your holding period for your "split" shares retain the same holding period of when you purchased the original shares.
[[ Thank you for any insite you might give me and hoping this makes sense..smile.
I'm pretty new at this stuff.]]
The you REALLY might want to check out the TMF Investment Tax Guide. We speak about this issue in more detail there, and you will also get some good, strong tax information regarding your investment issues. Check it out.
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