1. What is a Stock Split Cost Basis?

A stock split cost basis calculation determines the new per-share cost basis after a stock split occurs. This is crucial for accurate capital gains calculations when you sell your shares.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Old\ Basis \) — Original cost per share before split
• \( Split\ Factor \) — Ratio of the split (e.g., 2 for 2:1 split)

Explanation: When a stock splits, you own more shares but your total investment value remains the same. This calculator adjusts your cost basis per share accordingly.

3. Importance of Correct Cost Basis

Details: Accurate cost basis is essential for calculating capital gains taxes when you sell your shares. An incorrect basis could lead to overpaying or underpaying taxes.

4. Using the Calculator

Tips: Enter your original cost basis per share and the split factor (e.g., enter 2 for a 2-for-1 split, or 0.5 for a 1-for-2 reverse split).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between a stock split and a reverse split?
A: A regular split increases shares (e.g., 2:1 gives you 2 shares for each 1 you owned), while a reverse split decreases shares (e.g., 1:2 gives you 1 share for every 2 you owned).

Q2: Does a stock split change my total investment value?
A: No, a split only changes the number of shares and price per share. Your total investment value remains the same.

Q3: How do I handle multiple splits?
A: Calculate each split sequentially, using the new basis from one split as the old basis for the next.

Q4: What if I can't remember my original cost basis?
A: Check your brokerage statements or contact your broker. For very old investments, you may need to research historical prices.

Q5: Does this apply to mutual funds as well as stocks?
A: Yes, mutual funds can also split shares, and the same cost basis adjustment applies.