[GNC] Fundamentals of stock split

[Patrick James]

Kalpesh,

Although the example numbers you've chosen do make discussion a bit difficult, $2 proceeds for the 1/2 share with a cost basis of $2 per share, does have a $1 capital gain.


> On 07/13/2026 1:44 PM PDT Kalpesh Patel <kalpesh.patel at usa.net> wrote:
> 
>  
> This might not be a GNC question as much as Commodities Trading 101
> question.
> 
>  
> 
> So I have been trying to get my head wrapped around what exactly is a stock
> split at a very fundamental level (leaving specifics of entering into
> personal financial management software out). Mr. Ralls was nice enough to
> give me how-to enter BHF split from MET back in February that took place on
> July 18 2017; not exactly a stock split but a spin-off. Thanking him for
> giving me a "fish" at that time. But now I want to "go fishing" myself for
> how splits work and understand the mechanics of it. What is *incorrect* in
> this not so elegant statements (and example):
> 
>  
> 
> -          Buy X shares for total of $Y on date ABC (example: 3 shares at $5
> = $15 total cost)
> 
> -          On the split date that is post ABC date, it splits at a ratio of
> 2.5:1. My total number of shares increase by 1.5X plus original X for total
> equal to 1.5X + X or 2.5X (example: 2.5*3 = 7.5 shares) -- I have not
> mentioned any changes to cost basis here on purpose - original cost basis
> remains as is but this simply increases number of share that I now have
> 
> -          Since I had odd number of shares so if I am paid cash in-lieu for
> fractional shares, wouldn't the broker SELL my 0.5 shares at whatever the
> going market price is and then deposit that proceeds into my account say $Z
> amount (example: paid me $2)
> 
> -          Is capital gain on the fractional share: $Z -
> ($Y/2.5X)*shares_sold  (example: $2 - ($15/7.5)*0.5 = $2 - $1 = $1)
> 
>  
> 
> Thanks.
> 
>  
> 
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