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I hope this is a very easy question for someone.

When I was in college, I purchased one share of Dell (big time for college). It split and I purchased another share (total of two purchases and three shares). In December, I sold all three shares.

My question is: how does the split affect my taxes? I sold for less than I paid (remember, this was a college lesson) if that makes a difference.

I am going to try to prepare my own taxes, with the help of turbo tax, so I am hoping there is a real easy formula for this.



Since you bought one share and it split, your cost basis (what you paid for the share) becomes half of what it was orignally was, and you obviously have twice the shares, so your total cost is the same. You then purchased another share, increasing your total cost, but also increasing your share base. (Whether your overall per-share basis is higher or lower depends on what you paid for the 3rd share). With me so far? Since you will have the same total cost as if the split didn't occur, but are dividing by more shares, your cost basis is lower. But that is offset by the fact that the price was halved at the split also. Therefore, there is no difference in the taxes you pay or losses you can claim.

Hope this helps...


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