Since regular cash dividends are taxable as regular income, was the stock split be taxable as well?
Under current federal income tax law, the stock split does not result in a capital gain or loss or receipt of ordinary income to shareholders. The total tax basis does not change and the tax basis of each share of common stock held as a result of the split is equal to two-thirds of the tax basis of a corresponding share held immediately prior to the split. For example: if an investor owned 100 shares of AFG with a tax basis of $24.00 per share ($2,400 in the aggregate), after the split, the investor’s tax basis in the resulting 150 shares would be $16.00 per share ($2,400 in the aggregate). For capital gain purposes, the holding period of each share received as a result of the split is the same as the holding period of its corresponding shares held immediately before the spilt. Notwithstanding the above summary, shareholders are encouraged to consult their own tax advisor with respect to any individual tax implications of the stock split to such shareholder.
