I have to record a disposal of some shares on an individual's final return. These shares
were received May 15, 2002 but they split in May 2005 and the person died Oct 2007.
How is the cost and gain of these shares recorded when there has been a split?

xxluvmexxhatemexx

i dont know ask someoune that is an accounter or someone close to you

morgaine300

Um... that's kind of why we're at the site, to answer questions like this. There are accountants and tax people on this site, who are here to help with this stuff.

morgaine300

josie, you might get more attention for this if you posted in on the tax forum.

I can explain a stock split to you, but I've never had to handle one on taxes so not sure exactly how that is done. (I'm not a tax expert, and my own investing is limited to mutual funds, not individual stocks.)

Let's say you purchased 100 shares of a stock selling at $36 per share. So that's $3600. If you have a 2:1 split, that means each share of stock is now 2 shares. So that 100 shares becomes 200 shares. But it also means it's worth half as much. So instead of being $36 per share it's now $18 per share. And $18 x 200 shares is still $3600. So the total hasn't changed. You just have twice as many shares worth half as much each.

So whatever the split, you multiply the number of shares, and divide the cost. So for a 5:1 split, you multiply shares by 5 and divide cost by 5. Etc.

I did a quickie search on the IRS site, and looks like you'd treat this at the split price, which is what I suspected. i.e. in my example above, you'd use $18 as your cost basis.