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tezam1
Returning Member

COST BASIS AFTER A SPLIT

I PURCHASED 200 SHARES OF STOCK XYZ IN 1996 AT $25/SHARE  ALL DIVIDENDS WERE REINVESTED.  A STOCK SPLIT 2-FOR-1 OCCURRED IN 1999 DOUBLING SHARES TO 400.  IF I SOLD 100 SHARE IN 2019 AT $100/SHARE, WHAT IS MY COST BASIS?

6 Replies
NCperson
Level 15

COST BASIS AFTER A SPLIT

if you are using "FIFO" basis, the cost basis of those 100 shares is $25 per share. 

 

if you are using average cost basis or are identifying specific lots, you'd have to figure out the value of ALL the dividends that were reinvested. 

 

Once you choose one method you can't ever change to the other. 

tezam1
Returning Member

COST BASIS AFTER A SPLIT

Thanks for the answer, but why can't I still add my total dividends reinvested as part of my basis even with FIFO?

NCperson
Level 15

COST BASIS AFTER A SPLIT

because "FIFO" stands for first in first out.

 

You stated your originally purchased 200 shares which is now the equivalent of 400.  100 of those first 400 shares is what you sold under the FIFO method. the reinvested dividends have their own cost basis. 

fanfare
Level 15

COST BASIS AFTER A SPLIT

See IRS Pub 550 Chapter 4 sections on cost basis and average basis .

You'll have to take reinvested dividends into account sooner or later once the first 400 shares are sold.

tezam1
Returning Member

COST BASIS AFTER A SPLIT

Mark-I want to use the ACB.  I calculated my total dividends since 1996 initial investment was $11,979.52. My purchase price of 200 shares of WMT in 1996 was $27.26 per share...or $5452.  The 2:1 split occurred later, in 1999.  So would my share cost basis be $11,979.52 plus $5452 divided by 200=$87.15 per share?  For the 100 shares sold, that would be $8715 total cost basis...right?

NCperson
Level 15

COST BASIS AFTER A SPLIT

if you reinvested the dividends you would divide by the current number of shares, not 200. (in fact the total number of shares would be more than 400). 

 

if you did not reinvest the dividends, then your cost basis is simply $ 5452/ 400 or $13.63.  

 

how many shares are on your brokerage statement? 

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