On proceeds from sale of a spinoff stock. 12 shares reverse split to 6, split to 18 and finally split to 36 which were sold. How do I calculate the cost basis?

[JohnB5677]

If I understand correctly this is one stock that has gone through Mutiple splits.

If we start out with an original basis of $10 per share.

Start with 12 shares.  Cost basis/share is $10, Total Basis is $10 X 12 = $120

12 shares reverse split to 6.  Cost basis/share is $20, Total basis is $20 X 6 = $120

 split to 18, this is 3 for 1.  Cost Basis per share is $6.66667. Total BASIS IS $6.66667 x 18 =199.9999

and finally split to 36, THIS IS 2 for 1.  Cost basis per share is $3.33333.  Total basis is $3.3333 X 36 = 120.

Your cost basis per share is $3.33333.

The simplified method is to divide the total original cost by the current number of shares.

$120 / 36 shares = $3.3333

[longhornfan1970]

Thank you.  One additional clarification/question.  Since the sale was from a spinoff, how do I determine that initial cost to then do the split calculations on.  Is it the price of the new company stock on the day of the spinoff?  Or do I use the original purchase price for the original company?  My broker has not provided a price for the spinoff shares.  Note: All shares of the original company were sold shortly after the spinoff shares were granted so no portion of this most recent sale was from the original company shares, only the remaining spinoff shares.

[GeorgeM777]

That depends.  The post from @JohnB5677 assumed you still held the original shares, and therefore, your total cost basis never changed, just the per share cost basis as a result of the various splits.  It appears from your most recent post that the spinoff shares could be shares of a different class, i.e. preferred shares, non-voting shares, etc., from the original shares.  Is that true?   If they are shares of a different type and class, then you might have to treat their sale differently as opposed to the sale of the original shares.  Did the spinoff shares trade separately from the original shares and did the spinoff shares have their own ticker symbol? 

If the spinoff shares are of the same type/class, and everything was sold in 2022 (the original shares and the spinoff shares) you can still follow the advice from @JohnB5677.  

@longhornfan1970 

[longhornfan1970]

The spinoff shares do have their own ticker symbol.   From researching the history, it was the result of an acquisition.  The company associated with the spinoff shares acquired the original company. in 2002.  The original shares were sold in 2003 (the spinoff shares were received in 2002 and sold in 2022).  

[GeorgeM777]

If the spinoff shares were different from the original shares, it's not clear whether the the spinoff shares should be treated as a stock dividend or some other way for tax purposes.  What were the names of the original company and the acquiring company? Given that the spinoff happened twenty years ago, it may not be possible to research how the company characterized, for tax purposes, the spinoff shares.

@longhornfan1970 

[longhornfan1970]

Thank you @GeorgeM777 and @JohnB5677  for the responses and help!

The original company was AT&T Corp and the new company is Comcast Corp.  The spinoff shares were granted on 11/22/2002.  The activity description on a report from the brokerage is Comcast Corp New CL A Spinoff if that helps any but that is all that was provided (along with the number of shares).  There was no price associated with those shares or any other information.

[pk]

@longhornfan1970 , having read through all the valuable posts from @GeorgeM777  and @JohnB5677 , IMHO, we are complicating  this beyond recognition ( pardon, pardon ).  You bought 12 shares of XYZ company and through a whole bunch  spin-ffs/ bus etc. you ended up with  36 shares of ABC corp.  In all this your basis  did not change i.e. you have no more out of pocket since the initial purchase.  You report that you sold 36 shares of ABC Corp with your original investment amount as the basis.  Forms 8938 and Schedule-D only asks for total basis of the sold shares, the proceeds from the sale, when acquired  and when disposed  -- for acquisition date you have choice of using the original shares date or the updated  & exchanged date which even is pertinent ( long-term vs short term ).

Does this make sense ?

[longhornfan1970]

Thanks for trying to simplify @pk.  @GeorgeM777 @JohnB5677 

Here are the specifics in one timeline for clarity:

Original shares:

2002 bought 100 shares of AT&T

11/18/2002 - reverse split to 20 shares

3/13/2003 - Sold the full 20 shares of AT&T

11/22/2002 - Received 12 spinoff shares of Comcast Corp

2/2007 reverse split to 6 shares

5/2007 split to 18 shares

2/2017 split to 36 shares

2022 sold 36 shares

Trying to determine the cost basis for the 36 shares of Comcast sold

[pk]

@longhornfan1970 , from the details you provided and because you have already sold/recognized  the underlying At&T shares which generated the comcast shares, I would say the basis of these  36 Comcast share is zero. Thus it is all gain when you dispose of these -- long term.   These were probably shares as dividend and should have been recognized in the year they were given, but ....

IMHO

[JohnB5677]

If your company indicated that there was a cash value that you received as the result of the spinoff, or you purchased the spinoff shares, that value would be the basis. 

If that didn't happen, you should have apportioned a certain amount of the AT&T basis to the Comcast shares, but that also didn't happen. 

In this case, I agree with @pk, if you sold all of the 36 AT&T shares, and you took the full amount of the cost basis when selling those shares, the basis of the new Comcast shares will be zero.