Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15. See below for how to submit a question.

When calculating capital gains, do stock splits have to be compensated for when doing the arithmetic? If so, how is it done, i.e., what is the procedure?

Stock splits are not taxable transactions. When a split occurs, a taxpayer retains his/her original cost basis for the new number of shares. For example, suppose you bought 100 shares of XYZ Co. at $10 per share, or $1,000. Then XYZ had a two-for-one split. Now you have 200 shares that still cost you $1,000, each share with a cost basis of $5. If you sell 50 shares, your cost basis would be $250, or $5 multipled by 50.

Corrine Bradax, CPA, Linton Shafer & Co. The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial, The Sun's telephone information service, at 410-783-1800. Call 410-268-7736 in Anne Arundel County, 410-836-5028 in Harford County, 410-848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after the greeting. To submit questions by e-mail and access an online tax guide, go to The Sun's Web site at www.sunspot.net/tax.

Selected questions will be answered in the Business section. No questions will be answered personally.

Pub Date: 3/06/99