How do I calculate the tax basis for exchanged stock?

1. The company I worked for was taken over and my employee purchased stock was exchanged at the ratio of 0.7104. My number of shares was reduced fro 935 to 664. The orginal price was $29.00.

2. Later there was a reverse split 1:7. Leaving me with 94 shares.

I sold some this year and need to find the basis. Does anyone know where I can find an example on how to find the basis or know how to do so?

Your total basis for the shares does not change, either with the stock exchange or the reverse split. Your basis per share will change but the total basis does not.

If you bought 935 shares at $29.00, the total basis was $27,115. The 94 shares you now still have the same basis of $27,115 but an individual basis of $288.457 per share. So if you sold some of those 94 shares, your basis for them would be $288.457 per share.

This assumes that there were no "bonus" shares awarded as part of the stock exchange. If there were, you would have to adjust the numbers for the bonus shares. Additionally the bonus shares would be taxable as ordinary income in the year you received them in most cases. This can get complicated but you should have received a statement that explained all of this.

TFTP Report It

seems like the easiest way is
original cost = 935 x 29=$27,115

$27,115 / 94 =$288.46

If you purchased all of the original 935 shares at $29/share, then the above answers are correct. However, in most company stock plans the employee has a fixed amount deducted from his/her paycheck each pay period and that is used to buy stock at the current price. This would mean that each share or partial share has a different price and the basis would be the total of the amounts withheld from the paychecks. You also need to consider if any dividends were received and re-invested. Tax has been paid on those dividends so those dividends become part of your basis also.