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Hello,

I owned 501 shares of SNS which I bought in a single transaction during October 2008 in a taxable account. On 12-19-09 (market closed) SNS initiated a 1:20 reverse stock split resulting in 500 of the shares converting to 25 shares. The remaining 1 fractional share did not convert and was cashed out by the broker.

I plan to report the cashed out 1 share on Schedule D at the closing market price on 12-18-09 before the split, and apply its proportional cost basis from the original purchase to arrive at the long-term capital gain. Is this the correct method to use?

Thanks,

harbor991
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Is this the correct method to use?

Not quite.

The amount of cash you received is the sale price. The cost would be your original total cost (the price for all 501 shares plus the purchase commission) divided by 501. Subtract the cost from the sale price, and you have your gain or loss.

You don't need to worry about figuring up the sale price - your broker will report that on a 1099B. It should match the cash you actually receive into your account. Since this just happened, you might not have the cash yet, but you will soon.

--Peter
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Peter,

Thanks so much for your reply. You guys are good!

harbor991
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