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Attention CFP's!!  Any help is appreciated.  I have a client that has about 500k in various concentrated stock positions (we have the original certificates.  Some of the holdings are over 30 years old.  In looking forward for the client, we need to determine the original basis on these holdings.  The client has no idea what the basis is.  How can we get this information?  A second question - stock received form a split, would the basis on those shares be the price of the stock when the split was declared?  Thanks for your help.

Simplified version:

The basis is the price the stock was bought for originally. You then have to adjust for any splits that occured after the stock purchase. For example they bought 100 shares ofthe ABC stock for \$50 a share, total purchase \$5000.   If the ABC stock split 2 for 1 and he gets another certificate for 100 shares and now has 200 shares of ABC.  His cost basis is still \$5000 with 200 shares at \$25 per share for cost basis.  You divide the original cost basis by the number of splits.   If the stock did a reverse split the process is basically the same.  100 shares of ABC reverse split 1/2 (for every two stocks they have they now have one)  Cost basis is still \$5000 at 50 stocks with a cost basis of \$100 each.

Big Charts on line can do this calculation and show you how many times the stock has split.   I have used this method to find out if the client really has all the certificates they should have (missing or destroyed) or if some of the splits have been held at the transfer agent.

Spin off of stock from a parent company is somewhat different since the spin off could be part stock and part fractional shares in cash.  I usually go right to the source, the company or the transfer agent and get the forumula from them.  Do you have an internal department in your frim that can help you with this?

Just hope you don't have to deal with ATT stock.  It is a nightmare!!!

Who said in algebra class,   "Why am I learning this crap? I'll never use it."   /raises hand

[quote=babbling looney]

Simplified version:

The basis is the price the stock was bought for originally. You then have to adjust for any splits that occured after the stock purchase. For example they bought 100 shares ofthe ABC stock for \$50 a share, total purchase \$5000.   If the ABC stock split 2 for 1 and he gets another certificate for 100 shares and now has 200 shares of ABC.  His cost basis is still \$5000 with 200 shares at \$25 per share for cost basis.  You divide the original cost basis by the number of splits.   If the stock did a reverse split the process is basically the same.  100 shares of ABC reverse split 1/2 (for every two stocks they have they now have one)  Cost basis is still \$5000 at 50 stocks with a cost basis of \$100 each.

Big Charts on line can do this calculation and show you how many times the stock has split.   I have used this method to find out if the client really has all the certificates they should have (missing or destroyed) or if some of the splits have been held at the transfer agent.

Spin off of stock from a parent company is somewhat different since the spin off could be part stock and part fractional shares in cash.  I usually go right to the source, the company or the transfer agent and get the forumula from them.  Do you have an internal department in your frim that can help you with this?

Just hope you don't have to deal with ATT stock.  It is a nightmare!!!

[/quote]

A good review for this time of year. Nice concise answer.

As BL suggested, instead of doing it yourself your b/d if it’s of any size it (or maybe the clearing firm your b/d uses) should have a department (ours is called the Pricing Department) that can research stock prices adjusted for splits, etc. to give you the basis if you can give them an acquisition date and number of original shares.

[quote=bankwannabe]

Attention CFP's!!  Any help is appreciated.  I have a client that has about 500k in various concentrated stock positions (we have the original certificates.  Some of the holdings are over 30 years old.  In looking forward for the client, we need to determine the original basis on these holdings.  The client has no idea what the basis is.  How can we get this information?  A second question - stock received form a split, would the basis on those shares be the price of the stock when the split was declared?  Thanks for your help.

[/quote]

Why do you want to know? Are you his accountant?