Will Apple’s 4-for-1 stock split impact your tax returns?

In July, Apple’s Board of Directors approved a 4-for-1 stock split designed “to make the stock more accessible to a broader base of investors.” One question people have is how will Apple’s 4-for-1 stock split impact their tax returns, if at all?

Each Apple shareholder of record at the close of business on August 24, 2020 received three additional shares for every share held on the record date, and trading begann on a split-adjusted basis on August 31, 2020.

Apple's 4-for-1 stock split

Charlene Rhinehart for The Motley Fool:

The total value of your stocks doesn’t change and you don’t have to stay up all night learning the latest tax laws. A stock split does not impact your taxable income for U.S. federal income tax purposes — unless you decide to sell your shares.

Stock splits are one move in the markets that won’t give you a headache during tax time. Unlike selling a stock or earning dividends, a stock split does not increase your income in itself. You may have received additional shares in your account, but you didn’t receive additional money in your hands as a result of the stock split.

A stock split gives you the “enjoy your life and forget about taxes” pass — no action required on your behalf when a stock split occurs. But if you get too antsy and decide to sell shares of stock after a split, there are taxes to pay. The IRS requires you to pay either short-term or long-term capital gains taxes on any profits you receive in the stock market.

MacDailyNews Note: Check out the chart in the full article that shows the different capital gains rates for different filers and taxable incomes.

7 Comments

  1. One common post-split error, for some people it’s an intentional error, is not to adjust the basis down. So, say if you bought Apple at $100, then it shot up to $500, then split 4-1. Your new basis would be $25, and any potential capital gain would be the same as before.

    However, sneaky people, ok cheaters, would forget to adjust the basis and keep the original basis at $100, and if the new price is $125, then their capital gain would be $25, if they sold. Clearly wrong, but people would do that.

    Now, that brokerages are required to report stock transactions to the IRS, these kinds of intentional errors are minimized, but you can imagine how many people used to make innocent errors in the past.

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