Cost basis calculation process?

[tax_noob]

Hello!

Trying to figure out a cost basis here for a stock sale and I’m inside out on the process. Done a lot of reading but maybe y’all can correct my process?

I sold stock in 2020. The cost basis is missing - it’s a long-held stock. 

I know the purchase date of the original shares and looked up their historical value.

I know the stock had 3 splits between purchase and sale (2:1, 2:1, 7:1)

Knowing the number of shares I’ve sold (291) I can go backward to find the number of original shares:

291/7/2/2 = 10.39 original shares.

Taking the original share number (10.39) * the referenced historical High (0.232143 /share) = the original value of the shares sold ($2.41)

(NOTE: How do I know which value High, Low, Close, Adjusted Close is the one to value the original stock purchase at?)

The cost basis is then the value of the shares purchased ($2.41)  

That will give me my capital gains for a long-term gain taking the sell price of 291 shares minus the $2.41 original stock purchase correct? 

Assuming I’m anywhere close to this point - I know dividends also play a factor. There were a few times I cashed out but predominately were reinvested dividends. I know I’d have already paid taxes on the cashed out dividends but am still confused about how reinvested dividends would affect the cost basis I need to report.

Help! Thanks.

[JohnB5677]

You have done a magnificent job of going through some complicated research and calculations.  Absolutely everything you've done so far is correct.  The only issue I will address is reinvested dividends.

If you don't know the exact moment the stock originally traded you can use the value at the close of the sesssion.

When you received the dividend you paid the tax on it. So the amount of the dividend is the cost basis.  You would have to determine the shares based on the date you acquired the stock.  You would then make the adjustment for the splits.

[tax_noob]

Hi @JohnB5677 

Thanks for helping me out. I'm afraid I'm not following though. How is the amount of the dividend the cost basis? Are you saying I need to calculate what portion of the dividends issued were for that original stock quantity of 10.39 shares throughout its life and stock splits? 

I've uncovered a historical record of each dividend paid over the life of the stock in question. Thankfully two of the 3 splits occurred before cash dividends were issued so it won't be that difficult to figure out how much in dividends I made over the life of 10.39 original shares. 

If I'm still on the right track what am I doing with this dividends total I've calculated? How does that factor into the cost basis calculation for determining my tax liability?

[JohnB5677]

If you reinvested dividends, that money was used to purchase stock.  So you would have to calculate (Dividend / Stock price = Shares).  The value of the dividend then becomes the bases for all of the shares purchased.

Depending on when you sold them (using first in first out) you may have included some of the dividend shares.  Those shares would be included in the cost bases.