Your cost basis in the rights would be $0 or some allocation of your cost basis for the 400 actual stock shares over
- the cost basis of the 400 actual stocks, as well as
- the 400 rights.
As an example, if you paid $4,000 for the 400 shares of stock your cost basis will be $4,000 or $10 / share.
If shareholder services valued the rights at $3.50 / unit at the time that they were issued, your investment now becomes:
400 stocks x $10 = $4,000 74%
400 rights x $3.50 = $1.400 26%
$5,400 100%
After allocation the cost basis remains $4,000 but allocated over the two assets.
400 stocks $2,960 = 74% X $,4000
400 rights $1.040 = 26% X $4,000
$4,000 100%
If you choose to allocate, retain a record of your computations in case a tax authority has a question at a later time.
If you report a $0 cost basis, you enter '0' in the cost basis.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
