PROBLEM: Sold 1,225 shares of ABC Corp. stock at $9 per share. Green purchased 600 shares several years ago at $30 per share. Three years ago, when the stock price was $21, there was a 2-for-1 stock split, and two years ago, when the stock price was $25, there was a 3-for-2 stock split. No other shares were sold by Green prior to Year 2.
SOLUTION: Green's total basis in the stock of $18,000 (600 shares × $30 per share) does not change. After the 2-for-1 and then the 3-for-2 stock split, Green owns 1,800 shares of stock, which makes the basis after the stock splits $10 per share. Green can recognize a loss of $1 per share ($9 sales price per share less $10 basis per share) or a total recognized loss of $1,225.
Conceptually, I get it. What's throwing me off is where they 1,800 shares from. I only count 1,500. Start at 600, the 2-for-1 split gives you an additional 300, taking you to 900 shares. Then the 3-for-2 split gives you an additional 600 shares, taking you to 1,500.
I'm assuming the 3-for-2 is where I'm messing up, but I'm not seeing how. 900 shares / 3 = 300 * 2 = 600
.