Yahoo Finance provides historical stock prices. Their "Historical Data" table shows two daily closing prices. The "Close" price is adjusted for stock splits ($83.05) , the "Adj Close" price is adjusted for splits and dividends ($66.30). They are significantly different (Values are for DE on 12/31/2010). Which should I use for cost basis determination?
Stock Cost Basis
- Thread starter km4hr
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njhowie
Thinks s/he gets paid by the post
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If there were no splits, then you use the unadjusted basis - which should be your original purchase price. If shares have split, then you use the split adjusted basis. You pay taxes annually on the dividends, so you do not adjust your basis by the dividend amount.
Does your brokerage account not show what your basis is?
I would not go by what Yahoo Finance shows unless you have absolutely no records and your brokerage cannot provide the info.
Does your brokerage account not show what your basis is?
I would not go by what Yahoo Finance shows unless you have absolutely no records and your brokerage cannot provide the info.
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Not sure why it says adjusted for splits. As far as I can see, it closed at $83.05 on that day. That’s the price I would use.
Brokerages started keeping cost basis information around 2011. Before that you had to keep your own purchase information.
I think I see why splits make a difference in the original share price. For example, suppose you purchase one share of a stock for $10. If the stock splits two for one you then have two shares worth $5 each, all else being constant. Notice your share price dropped from $10 to $5 on the day of the split. But since you now have twice as many shares you didn't lose any value. The total value of your stock is the same before and after the split. Now say you want to sell your stock. Your cost basis is no longer $10 per share. It's $5 per share. Yahoo Finance takes this into consideration in the stock prices they quote, I believe.
Apparently dividends also impact cost basis values. I just don't understand it as well. Stock prices tend to drop when a dividend is paid (actually the ex-dividend date). That's because the owner of a stock gets the dividend. For example, if you own a share of stock one morning and a dividend is paid at noon then the value of the stock will drop at noon by the amount of the dividend. The next owner won't be willing to pay as much because you got the dividend. I just don't understand how this impacts the share price over a period of years.
I think I see why splits make a difference in the original share price. For example, suppose you purchase one share of a stock for $10. If the stock splits two for one you then have two shares worth $5 each, all else being constant. Notice your share price dropped from $10 to $5 on the day of the split. But since you now have twice as many shares you didn't lose any value. The total value of your stock is the same before and after the split. Now say you want to sell your stock. Your cost basis is no longer $10 per share. It's $5 per share. Yahoo Finance takes this into consideration in the stock prices they quote, I believe.
Apparently dividends also impact cost basis values. I just don't understand it as well. Stock prices tend to drop when a dividend is paid (actually the ex-dividend date). That's because the owner of a stock gets the dividend. For example, if you own a share of stock one morning and a dividend is paid at noon then the value of the stock will drop at noon by the amount of the dividend. The next owner won't be willing to pay as much because you got the dividend. I just don't understand how this impacts the share price over a period of years.
RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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The dividend won't affect your stock basis on the original shares. This dividend adjusted price is probably given to more equally compare historical stock prices and returns for stocks that yield various levels of dividends, down to none. It is not used for basis.
If there was a dividend, and you took it in cash, you paid a tax on the dividend in the year you got it and that's the end of it. You still have your 2 shares at $5 basis each.
If you reinvested the dividend, that's different. Let's say you got a $1/share dividend after the split, and the price of the stock was $6 at that time.
First, the dividend ($2) was taxed that year. The automatic reinvestment process then bought $2 worth of stock, giving you another 0.333 shares. So now you have 2.333 shares. 2 shares have a basis of $5 each, and the 0.333 shares have a basis of $6.
Hopefully, if you did reinvest shares, the holding company has those purchase prices to help you. Otherwise you've got some math to do. Perhaps old tax returns showing the dividends paid each year will help you, as they add to the basis.
If there was a dividend, and you took it in cash, you paid a tax on the dividend in the year you got it and that's the end of it. You still have your 2 shares at $5 basis each.
If you reinvested the dividend, that's different. Let's say you got a $1/share dividend after the split, and the price of the stock was $6 at that time.
First, the dividend ($2) was taxed that year. The automatic reinvestment process then bought $2 worth of stock, giving you another 0.333 shares. So now you have 2.333 shares. 2 shares have a basis of $5 each, and the 0.333 shares have a basis of $6.
Hopefully, if you did reinvest shares, the holding company has those purchase prices to help you. Otherwise you've got some math to do. Perhaps old tax returns showing the dividends paid each year will help you, as they add to the basis.
Runningbum,
Thank you for taking the time to carefully consider my question and to respond. You explained it well. I asked Vanguard support how dividends effect share price but as soon as I said the word "tax", the conversation was over.
Thank you for taking the time to carefully consider my question and to respond. You explained it well. I asked Vanguard support how dividends effect share price but as soon as I said the word "tax", the conversation was over.
