Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I have two scenarios in my portfolio in which I need guidance. I need to determine my cost basis (correct term?) and capital gains tax. I am currently in the 28% tax bracket.
1. I own a stock, V (paid $1000 for 100 shares or $10/share), for >18 months and it merges with another company to form company W (they increase my original 100 shares of V to 300 shares of W after the merger). If I sell immediately after the merger a)do I pay long or short term capital gains and b)how do I calculate my per share cost for this gain? Is it simply 1000/300 or 30/share?

2. I also own stock, Y (paid $4000 for 100 shares or $40/share), for > 18 months and it spins-off Company Z. Because I own 100 shares of Y, I am given 25 shares of Z. If I want to sell Z, a)how do I calculate my per share price and b) would it be considered a short or long term capital gain? Is my long term cost basis for Y unchanged or does the spin-off correct for the loss of Z?

I know this is confusing and I am not sure if I have supplied all the necessary info but I would appreciate anyone's advice and/or direction to my questions.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.