Asked by Alan  |  Submitted January 15, 2015

In the mid 1990's I purchased shares in Citicorp (then Citibank). By 2001 I had about 800 shares. They did a 10 for 10 split in 2011.

I sold half my shares in 2014. How can I best figure out cost basis for this?

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  Answers  |  2

January 29, 2015

The 10 for 10 split is not correct. I believe they did a 1 for 10 reverse split, which means for every share you owned, you got 10 shares but it also increased your cost basis in the stock by 10 times. For example, if Citi was trading at $10 and you owned 100 shares before the split, after the split you would own 10 shares and the stock would be trading at $100. Same amount of overall value in the stock just different numbers. If Citi cost you $5 before the split, the new cost basis would be $50. So if you sold the stock, it would probably produce a loss on paper for tax purposes.

Meredith L | 08.12.15 @ 06:02

I had to read your answer twice but I think I understand. Thank you.

$commenter.renderDisplayableName() | 01.16.21 @ 05:55


March 29, 2016

Hi Alan.

I am very familiar with this. It was a reverse split. HUGE difference.

Most capital gains tax software (sch D) can address this. Your accountant should also be able to address it.

Here is a general formula for calculating basis on reverse splits:
Calculate your original basis for all of the shares you purchased, including commissions, by Multiply the number of shares purchased by the price per share. Add the commission paid to figure your total basis in the stocks. Calculate the number of shares you have after the reverse stock split by dividing the number of shares you originally owned by the number of old shares that are equal to one new share. Divide the total basis by the number of shares you have after the stock split to calculate the average cost basis.

Feel free to contact me directly to discuss further.

It's not what you make, It's what you keep that determines your lifestyle.

$commenter.renderDisplayableName() | 01.16.21 @ 05:55