Back in the 1980's I received lumps of stock each year as part of an employee stock ownership program.
I kept the paper stock certificates myself. For example lets say one lot was 10 shares and the price of the stock on the certificate date was $8 per share. So the cost basis was $8 and the total was $80. The next year I received 20 shares and the cost basis on those was $9 for a total cost basis value of $180. Several years later after I left the company, the stock split and I received another 30 shares of stock. None of those shares had any cost basis information but there was a date on the stock certificate. For those additional shares how do I calculate the cost basis? Do I use the price of the stock on the date on the stock certificate or do I add the total cost basis together (80 + 180 =260) and divide by the original number of shares (30) to get an average cost basis of $8.67 each before split and then divide by two to get a cost basis of $4.33 for each of the new shares. The cost basis of the first shares dropping to $4 and the cost basis of the second 20 shares dropping to $4.5. Which of these two methods is correct or should it be done some other way?
It is important to note that when stock splits, your total number of stocks increases but your cost remains the same since you did not have to pay anything extra when stock split happens. In your case, you will need to adjust cost basis per lot. In your case, that means, two lots (One for 10 and one for 20 stocks). You use the price as per stock certificate and adjust the basis ($4 and $4.50 as you calculated). I hope this is helpful.
**Please cheer or say thanks by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Regards,
TurboTax Expert