Asked anonymously

On Form 8949, how do I enter a "corporate action (adjustment)" from the 2011 uncovered 10-for-1 reverse stock split of Citigroup Inc?

No shares were involved, but it was reinvested into the new Citi account and taxes were paid on the amount so it should be included in the cost basis.

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  Answers  |  1

March 15, 2017

Hi Anonymously.

Can you elaborate on "no shares involved" and why "taxes were paid on the amount"? With a stock split (also reverse split) itself, taxes are generally not incurred.

To calculate the adjusted basis:
* Calculate your original basis for all of the shares you purchased, including commissions, by multiplying the number of shares purchased by the price per share.
* 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.

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