Taxes and Splits
You probably already saw the post. The answer is that the basis is split as well. This checks out with some reading I did in Lasker's.
So, if you purchased 100 shares at $10/share, then following a 2-for-1 split, the new basis is $5/share. Consequently, the split has no effect at all on your taxes. If you sell, half your position, you still have to pay taxes on 1/2 the profit.
Now, another question: Suppose I happen to have bought some shares on margin so that I have less than 100% equity in my account. All my interest is tax deductable. Now suppose I sell 100 shares IOMG, say at $45 and then take $4500 out of the margin account. Also suppose that I'm still below 100% equity after the sale. Doesn't this mean that the money I extract from my margin acount is considered a personal loan by the IRS? Thereby causing me an acounting headache at tax time. Is there any way of keeping my investment interest fully deductable? (without having to sell enough to come up to 100% equity).
BTW, it sounds like we both discovered IOMG at about the same time, although one of it's initial hickups caused me to get out after my first doubling. I discovered the ZIP through a mail-order catalog. I figured that everyone would want one as much as I did. I casually noted the stock was selling for $7, but I didn't buy it because it had run-up from ~$3 (This is 2 splits ago). When it hit $10, I finally did the research: The company was small, no debt, new management, incredible new (Market Driven!) product. It was a classic story -- I bought in! I quickly doubled my money, and sold out. A bad move. I bought back-in about a month later, after realizing that their plan was to replace the 1.44Meg floppy. I have accumulated more as the probabilty of success has gotten higher. What a great story! Needless to say I'm a hero at home, my wife commented: "I thought only Hillary Clinton could make money like that." |
