Business, Legal & Accounting Glossary
Less than a single share of stock. Fractional shares often result from stock splits, stock dividends and similar actions. The fractional share is either paid out in cash or credited to a dividend reinvestment plan.
A fractional share is a fraction of a share or less than one whole share. A fractional share can occur if a company splits its stock, merges with another company in a stock swap or stock buyout or pays a stock dividend. Although most companies allow fractional share holdings to exist in their dividend reinvestment plan, an investor cannot buy and sell a fractional share. Instead, the company will require an investor who is liquidating a fractional share position to accept the cash value of the fractional share. Another alternative is for the company to round the fractional share amount up or down to the nearest whole number of shares. The IRS requires investors to include fractional share amounts in their cost basis when reporting stock sales on Schedule D of their tax return.
You may want to try and take on even a fractional share if that is all you can afford at the current time.
Do not take fractional shares for granted. Oftentimes, these shares are added to an investor’s shareholdings and can accumulate over time.
I contributed some particular amount to the share plan over six months, which is very unlikely to be a multiple of the share price at the time the money is used to purchase company shares, so I will receive a small cash payment in lieu of the fractional share at that time.
cash in lieu (CIL)
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This glossary post was last updated: 2nd November, 2021 | 0 Views.