corporate actions |Form 8949 Capital Gain & Wash Sales calculator software

Corporate Action


Corporate Action

Stock Splits, dividends, mergers, acquisitions and spinoffs are all examples of corporate actions. For example, a company may decide to split its shares 2:1, leaving shareholders with twice as many shares as they had before. In many cases, a corporate action will result in a new position or a change to the cost basis of the security.

As a result, investors should make necessary cost basis adjustments for each security. With thousands of corporate events that affect a stock’s cost basis, the odds are good that an investor will encounter one sooner or later. some corporate actions are easy to manage, while some need more manual calculations. As every corporate action type has its own rules, the investors must learn if they want to fill their Schedule D forms accurately.

Wash sale activity can further complicate the arduous task of tracking and adjusting for corporate actions. TradeMax’s wash sale algorithms are synchronized with corporate action activity to alleviate this problem.

Cost Basis


Cost Basis

Cost basis, as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property’s basis.

From Publication 551: “Basis is the amount of your investment in property for tax purposes. Use the basis of property to figure depreciation, amortization, depletion, and casualty losses. Also use it to figure gain or loss on the sale or other disposition of property.”

The cost basis of any investment is the original value of an asset adjusted for stock splits, dividends and capital distributions. It is used to calculate the capital gain or loss on an investment for tax purposes. The calculation of cost basis can be complicated, however, due to the many changes that will occur in the financial markets such as splits and takeovers.

For example: If the company splits its shares, this will affect your cost basis per share. Remember, however, that while a split changes an investor’s number of shares outstanding, it is a cosmetic change that affects neither the actual value of the original investment, nor the current investment. Continuing with the above example, imagine that the company issued a 2:1 stock split where one old share gets you two new shares. You can calculate you cost basis per share in two ways: First, you can take the original investment amount ($10,000) and divide it by the new amount of shares you hold (2,000 shares) to arrive at the new per share cost basis ($5 $10,000/2,000). The other way is to take your previous cost basis per share ($10) and divide it by the split factor (2:1). So in this case, you would divide $10 by 2 to get to $5.

How TradeMax Can Help with Cost Basis

TradeMax can help with cost basis calculations. Investors enter original buy and sell transactions into TradeMax. TradeMax will allow you to match sell transactions against appropriate tax lots, and adjust positions and cost basis for corporate actions and wash sales manually.

When importing trade information from some brokers, users may receive baseline positions. These are positions that investors held open at the time their brokers sent their trade data. In order for TradeMax to accurately calculate gain/loss figures, users need to input their cost basis and purchase dates for these baseline positions.

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