Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-411 - GAIN OR LOSS - SALES OF PROPERTY › Rule 2.26-51-411 - 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.
When a dividend is paid with the stock of the dividend
					 payor, the basis for determining gain or loss from the sale of shares of such
					 stock shall be the difference between the sale price and the quotient (or
					 result) of the cost or other basis of the original shares of stock divided by
					 the total number of the old and new shares.
When common stock is received as a bonus with the 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. However, should that not be feasible, no profit on any
					 subsequent sale of any part of the stock or securities will be realized until
					 the total cost is recovered from the sale proceeds.
When a corporation issues to its shareholders rights to
					 subscribe to its stock, the value of the rights do not constitute taxable
					 income to a shareholder, although gain may be derived or loss sustained by a
					 shareholder from the sale of such rights. The following rules shall
					 apply:
(1) If the shareholder does not
				  exercise, but rather sells his rights to subscribe, the cost or other basis of
				  the stock with respect to which the rights are issued shall be apportioned
				  between the rights and the stock in proportion to their respective values at
				  the time the rights are issued. The basis for determining gain or loss from the
				  sale of a right or a share of such stock will be the quotient (or result) of
				  the cost or other basis assigned to the right or the stock divided 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 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, including the subscription price of the new shares, by the number
				  of new shares obtained.
(3) If the
				  stock with respect to 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 such stock was purchased at different times and at different
				  prices and the stock rights cannot be identified as having been issued with
				  respect to any particular lot of such stock, the basis for determining the gain
				  or loss from the sale of:
i. the old
				  shares;
ii. the rights in cases
				  where the rights are sold; or
iii.
				  the old or new shares in cases where the rights are exercised, shall be
				  calculated by applying the cost or ascertained value of the rights from the
				  earliest purchased stock.
The taxpayer may, at its option, include the entire
					 proceeds from the sale of stock rights in its gross income. The basis for
					 determining gain or loss from the subsequent sale of stock with respect to
					 which the rights were issued shall be the same as though the rights had not
					 been issued.