Generally, you do not need to pay taxes on the additional stock received as a result of a stock split. According to IRS guidelines and the Internal Revenue Code, stock splits do not create a taxable event. The additional shares you receive in a stock split are not considered income, and thus, you do not report them as such.
However, there are specific circumstances under which the additional stock could be taxable:
In typical stock splits where the additional shares are issued to all shareholders proportionately, these exceptions do not apply, and the stock split is not taxable. The basis of your original shares is reallocated between the old and new shares, but your total basis remains the same. This means you will need to adjust the per-share basis of your stock holdings.
For example, if you owned 100 shares with a basis of $15 per share (total basis of $1,500) and the company declared a 2-for-1 stock split, you would now own 200 shares. Your total basis would still be $1,500, but the per-share basis would be adjusted to $7.50.
In summary, unless the additional stock is received as compensation for services or you had the right to receive it as a shareholder, you do not need to pay taxes on the additional stock received from a stock split.
Sources:
§ 305. Distributions of stock and stock rights
Publication 525 (2023)
PLR 200004026
PLR 9709044
PLR 9347015
