How do I figure the cost basis of stock that split, which gave me more of the same stock, so I can figure my capital gain (or loss) on the sale of the stock?

To figure the cost basis of stock that has split, which gave you more of the same stock, you need to follow these steps:

1. Determine the Total Basis of the Original Stock: The total basis of your original stock is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees.
2. Allocate the Basis Between Old and New Shares: After the stock split, you must reallocate the basis of your original stock between the old shares and the new shares. The total basis remains the same, but the per-share basis changes because you now own more shares.
3. Calculate the New Per-Share Basis:
   • If the old shares and the new shares are uniform and identical, allocate the basis of the old shares to both the old and new shares. The new per-share basis is determined by dividing the adjusted basis of the old stock by the total number of shares (old and new).
   • If you purchased the old shares in separate lots for differing amounts of money, allocate the adjusted basis of the old stock between the old and new stock on a lot-by-lot basis.
4. Example Calculation:
   • Suppose you initially bought 100 shares at $10 per share, and later bought another 100 shares at $12 per share. If the stock undergoes a two-for-one split, you will now have 200 shares from the first lot and 200 shares from the second lot.
   • For the first lot, the total basis remains $1,000 (100 shares x $10). After the split, the new per-share basis is $5 ($1,000/200 shares).
   • For the second lot, the total basis remains $1,200 (100 shares x $12). After the split, the new per-share basis is $6 ($1,200/200 shares).
5. Record Keeping: Keep detailed records of the time and terms of each stock acquisition, the number and date of each certificate received, and the particular lot out of which each sale was made. This will help in identifying the shares sold and calculating the correct basis.
6. Reporting: When you sell the stock, use the adjusted per-share basis to determine your capital gain or loss. The gain or loss is the difference between the sale price and the adjusted basis of the shares sold.

By following these steps, you can accurately figure the cost basis of stock that has split and determine your capital gain or loss upon sale.

Sources:
Publication 550 (2023)
Rev. Rul. 56-653
Publication 551 (12/2022)