How to Calculate Your Cost After a Reverse Stock Split Pays You a Fractional Share
- 1). Multiply your original cost per share by the original number of shares. If you held 100 shares of XYZ company that you purchased for $4 each, your original total cost basis is $4,000. Don't forget to include any brokers' fees and commissions in the cost of your shares.
- 2). Calculate the number of shares received in the split (if you don't already know it) by dividing your total shares by the second number in the stock split ratio. If XYZ company performed a one-for-three reverse stock split and you held 100 shares, you receive 33.334 shares in the split.
- 3). Divide the original total cost by the new number of shares to get the new cost basis per share. In the example, $4,000 divided by 33.334 is $120 per share.
- 4). Multiply your new cost basis per share by the value of your fractional shares to determine the cost basis on the fractions. If you received 0.334 fractional shares with a cost basis of $120 per share, your fractional cost basis is $40.08.
- 5). Subtract the cost of your fractional shares from the value of the cash you received to determine your taxable gain or deductible loss on the fractions. If you received $50 cash in the XYZ company reverse stock split, your gain would be $9.92.
