Q: If my stock splits 2-for-1, what happens to my cost basis?
- R.Z., Houston
A: Your basis splits 2-for-1 along with the stock. Imagine that you bought 100 shares of Meteorite Insurance (ticker: HEDSUP) for $60 each, paying a $10 commission. Your cost basis is $6,010 - or $60.10 per share. After the split, you have 200 shares and your basis is still $6,010, or $30.05 per share.
Always add the purchase commission to your cost basis and subtract the sale commission from your proceeds - you'll save a few tax dollars that way.
If you're paying a lot more than $10 per trade in commissions, you might want to find a less-expensive brokerage.