Cost Basis: Stock Dividends and Stock Rights

What this video covers

• Why stock dividends are not taxable income, and how the same total cost basis spreads across more shares to reduce per-share basis
• The formula for new per-share basis after a stock dividend or forward split: original total cost basis divided by total shares
• How reverse splits work in mirror image: fewer shares means each share carries a larger portion of the unchanged total basis
• The 15% fair market value (FMV) threshold for stock rights: optional basis allocation below 15%, mandatory allocation at or above
• Why an optional election to allocate basis to stock rights is irrevocable once made
• How to calculate basis for shares acquired through exercised rights: allocated basis of rights plus exercise price
• Why expired rights with allocated basis return that basis to the original shares and generate zero recognized loss