Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › Regulation 1997-4 - Comprehensive Individual Income Tax Regulations › Rule 26-51-411 - GAIN OR LOSS - SALES OF PROPERTY › Rule 2.26-51-411(a) - Sale of Shares of Stock

Current through Register Vol. 49, No. 6, June, 2024
When shares of stock in a corporation are sold from lots
					 purchased at different dates and at different prices and the identity of the
					 lots cannot be determined, the stock sold shall be charged against the earliest
					 purchases of such stock. The excess of the amount realized on the sale over the
					 cost or other basis of the stock will constitute gain.
In the case of stock in respect of which any stock dividend
					 was paid, the basis for determining gain or loss from a sale of a share of such
					 stock shall be the difference between the sale price and the quotient of the
					 cost or other basis of the original shares of stock divided by the total number
					 of the old and new shares.
Where common stock is received as a bonus with a purchase
					 of preferred stock or bonds, the total purchase price shall be fairly
					 apportioned between such common stock and the securities purchased for the
					 purpose of determining the portion of the cost attributable to each class of
					 stock or securities but if that should be impracticable in any case, no profit
					 on any subsequent sale of any part of the stock or securities will be realized
					 until out of the proceeds of sales shall have been recovered the total
					 cost.
Where a corporation issues to its shareholders rights to
					 subscribe to its stock, the value of the rights does not constitute taxable
					 income to the shareholder, although gain may be derived or loss sustained by
					 the shareholder from the sale of such rights. In this connection, the following
					 rules may be stated:
(1) If the
				  shareholder does not exercise, but sells, his rights to subscribe, the cost or
				  other basis of the stock in respect of which the rights are issues, shall be
				  apportioned between the rights and the stock in proportion to the respective
				  values thereof at the time the rights are issued and the basis for determining
				  gain or loss from the sale of a right on one hand or a share of stock on the
				  other will be the quotient of the cost of other basis assigned to the right or
				  the stock, divided, as the case may be by the number of rights issued or by the
				  number of shares held.
(2) If the
				  shareholder exercises his rights to subscribe, the basis for determining gain
				  or loss from a subsequent sale of a share of the stock in respect of which the
				  rights were issued shall be determined as in Paragraph 1. The basis for
				  determining gain or loss from a subsequent sale of a share of the stock
				  obtained through exercising the rights shall be determined by dividing the part
				  of the cost or other basis of the old shares assigned to the rights plus the
				  subscription price of the new shares by the number of new shares
				  obtained.
(3) If the stock in
				  respect of which the rights are issued was purchased at different times and at
				  different prices and the identity of the lots cannot be determined, or if the
				  stock in respect of which the rights are issued was purchased at different
				  times and at different prices and the stock rights issues in respect of such
				  stock cannot be identified as having been issued in respect of any particular
				  lot of such stock, the basis for determining the gain or loss from the sale of
				  the old share or the rights in cases where the rights are sold or from the sale
				  of the old or new shares in cases where the rights are exercised shall be
				  ascertained by applying the cost or ascertained value of the rights from the
				  earliest purchased stock.
The taxpayer may at his option include the entire proceeds
					 from the sale of stock rights in gross income in which the basis for
					 determining gain or loss, from the subsequent sale of stock in respect of which
					 the rights were issued, shall be the same as though the rights had not been
					 issued.