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Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA Volume 3 Issue 98 February 2, 2001 |
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» From Waunakee, WI » Dear TaxMama, I am trying to figure out a cost basis for stocks that my husband is purchasing through his employer (purchased at a discount). The last tax advisor figured (in 1998) that the cost basis for the stock was 11.53. If there were no additional purchase transactions since then can we still use the 11.53? What about if there was a stock split since then? Do we reduce the cost basis to 5.77? This would increase our tax liability gain. Also - does the discount play a factor? Please smile favorably on this mommy up late trying to figure this out ... Thank you! Hi Caroline, Gee, it sounds so easy to me - now .... But I remember agonizing over this for a long time when I was learning to get it right. If there were no more purchase transactions ... and you didn't reinvest the dividends, then your basis didn't change. Sounds like your accountant already took the discount into account when he computed the basis in the first place. And sadly, my friend, yes. When the stock split, so did the basis - and each of the shares now have a lower cost. I know ... the gain is higher. But it really is! Look at all that free revenue you got when the stock split .... (sort of) Sounds like you've got a good handle on this. Best wishes, Eva Rosenberg TaxMama |
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