Adam purchased 1,000 shares of Airco Inc. common stock for $22,000 on February 3, 2014. On April 1, 2018, Adam received 100 new shares in a nontaxable stock dividend. As of April 1, the stock was trading at $25 per share. Adam sells the 100 new shares on June 15, 2018 for $2,400. Due to the stock sale, Adam will recognize a

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The stock dividend was nontaxable, so the basis of the original shares is allocated to the new shares. The original cost basis was $22,000 for 1,000 shares, or $22 per share. The new basis for the 1,100 shares is $20 per share ($22,000/1,100). Selling 100 shares at $2,400 means a sale price of $24 per share, resulting in a gain of $4 per share or $400 total. Since the original shares were held long-term, the gain is a long-term capital gain (LTCG).

Adam Purchased 1,000 Shares of Airco Inc