Q:

How do you detect and adjust for stock splits?

A:

Quick Answer

To detect and adjust for stock splits, visit the official NASDAQ website and interpret the impact on a portfolio. Stock splits reduce the market share price of the associated security, according to the Houston Chronicle.

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Full Answer

The official NASDAQ website contains information related to company name, split ratio, date payable, ex-date and announced date. These dates serve as guidance relating to when the stocks impact the associated portfolios. A stock split does not dilute ownership of the security. Instead, it reduces the value of the security in relation to the split ratio, as noted by the Securities and Exchange Commission. Common stock splits occur for one or for two, but any other combination is possible.

An organization's board of directors is responsible for declaring a stock split, as noted by the Houston Chronicle. From an ownership standpoint, there is no gain or loss associated with the transaction. As of 2015, the Internal Revenue Service does not require taxpayers to report a stock split. Basis in the security, however, must be adjusted to reflect the new price of the stock. This information becomes crucial when selling a security and determining capital gains calculations. For a company, there are no numerical changes on the related financial statements. If the stock carries a par value, a memo entry should be included with the financial statements indicating the change.

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