1.49- Are there any taxes due on the additional stock I received due to stock split?


Do I need to pay taxes on the additional stock that I received as the result of a stock split?

Answer

No. In a stock split, the corporation issues additional shares to current shareholders, but your total basis doesn't change. Following a stock split, you must reallocate your basis between the original shares and the shares newly acquired in the stock split.

  • Stock splits don't create a taxable event; you merely receive more stock evidencing the same ownership interest in the corporation that issued the stock. You don't report income until you sell the stock.

  • Your overall basis doesn't change as a result of a stock split, but your per share basis changes. You'll need to adjust your basis per share of the stock.

    • For example, you own 100 shares of stock in a corporation with a $15 per share basis for a total basis of $1,500. In a 2-for-1 stock split, the corporation issues an additional share of stock to the shareholder for each share the shareholder owns. You now own 200 shares, but your total basis is still $1,500. Following the stock split, you must reallocate your basis between the original shares and the shares newly acquired in the stock split. Your basis per share is now $7.50 ($1,500 divided by 200) for each of the 200 shares.

Additional Information

Tax Topic 409 - Capital Gains and Losses

Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)

Category

Capital Gains, Losses, and Sale of Home

Sub-Category

Stocks (Options, Splits, Traders)