Stock split and tax implications

[Teixe]

One of the stocks I own will be splitting very soon,in the words of the company "two-for-one stock split of the company's outstanding shares of common stock to be effected in the form of a stock dividend" .

I was not planning on selling but if the part in bold means a realized gain then I may well sell, could someone share some light please, mainly two questions:
1.-How do you calculate your gain after you sold a stock that had splitted during your ownership, is it just as easy as telling HMRC that the stock splitted and now your bought price and number of shares need to be adjusted?
2.- Does the part in bold means that a tax implication will be triggered right away?

Cheers

[Eric Mc]

Will the gain exceed the CGT threshold?

Will the proceeds on disposal exceed £30,000?

Do you mormally complete Self Assessment tax returns?

[Teixe]

Eric Mc said:

Will the gain exceed the CGT threshold?

Will the proceeds on disposal exceed £30,000?

Do you mormally complete Self Assessment tax returns?

1. If I sell before the stock split then yes. If I hold the shares, I don't know, hence the question about how stock splits work.

2.- As number one, If I sell before the split then yes.

3.- Yes.

[twinturboz]

I'm sure others will be able to advise you far better than I can, but in essence as I understand it the number of shares you own will double, but at the same time the price of the shares will half.

Therefore the total value of your shares stays the same. Eric will be able to confirm the capital gains effect but in my understanding the new shares are not treated as an acquisition and the base cost of your existing shares are divided between the new shares when it comes to working out your cgt when you sell.

Edited by twinturboz on Friday 6th May 11:37

[The Leaper]

I've had the same thing happen in the past. The number of shares doubles but the price halves, so no gain and no tax implications regarding the split itself. Most splits are to manage the share pric, as trading is considered to be simpler at a modest rather than high cost per share...I don't really understand why this should be the case!

R.

[Teixe]

Thanks all, that's what I thought but I needed to hear/read from people with experience on the matter.

[son of a vette]

There will be no gain or loss on a split. It is purely an exercise by the company to alter the share price, whilst the market capital of that company remains the same.

2for1 means your shares will split in half, as will the price, you will only have a gain or loss if you sell.

Check the terms though, the US and UK have different definitions for a stock split, in the UK 2 for 1 means if you have 1 share at the moment, post split you will have 2.
In some US cases 2 for 1 means if you have 1 share at the moment, post split you will have 3.

[northandy]

As others said no tax implication until you sell, 5 years ago some US shares I hold split when they hit $100, those rose again after the split to $60 after a recession dip they have now bounced to $112 again, and the split rumours have started again.