How to Calculate Cost Basis After Stock Splits

A stock split is a non-taxable event, but it does change your per-share cost basis. Get the adjustment wrong and you can pay tax on phantom gains.

Forward Split (2-for-1)

Your share count doubles; your per-share basis halves. Total basis is unchanged.

Example: you bought 100 shares at $80 (basis $8,000). After a 2-for-1 split you own 200 shares, with a per-share basis of $40 each. Total basis: still $8,000.

Forward Split (3-for-1, 4-for-1, etc.)

Same logic. Multiply share count by the ratio numerator; divide per-share basis by the same number.

Reverse Split (1-for-10)

Your share count divides by 10; your per-share basis multiplies by 10. Total basis is unchanged.

If the result includes fractional shares your broker can't issue, you receive cash in lieu. That tiny cash-in-lieu payment is a taxable event — typically a small short-term capital gain.

Cash-and-Stock Splits (Rare)

Sometimes a corporate action is a mix: some new shares, some cash. The cash portion reduces your basis. The IRS publishes guidance for big-name examples (Verizon spin-offs, Comcast/Time Warner splits, etc.).

What Total Basis Looks Like

Forward and reverse splits never change your total cost basis. They redistribute it across more or fewer shares. The IRS only cares about total basis when you eventually sell.

A Worked Example

You bought 50 shares at $200 = $10,000 basis. 4-for-1 split → 200 shares at $50 each = still $10,000 basis. You sell 100 shares for $8,000. Profit = $8,000 − (100 × $50) = $3,000.

Plug arbitrary splits into our Stock Cost Basis Calculator — enter the post-split share count at the adjusted per-share basis.

Bottom Line

Adjust per-share basis inversely to the split ratio. Total basis never changes. Cash in lieu is a small taxable event you don't want to forget at tax time.