What is cost basis? It is the term used for the tax cost of an asset. It usually starts out as the purchase price (plus commissions and fees) but "stuff" happens that can cause your basis to change. Things called corporate actions can occur such as stock spinoffs, mergers, splits, split-offs, rights, or return of capital, all of which affect your cost basis. These are also called corporate reorg (reorganization) actions. Did you know thatclass action claim checksand even a corporate headquarters move (change of domicile)can affect your cost basis?
Totally confused? Keep reading and we will help you out.
We explain in plain English the events that can affect your cost basis and the steps you need to take to calculate it. We give you ideas for questions to ask and where to go to find
the information you need.
Why do we even care about cost basis? Because you are going to need to know it when you sell the asset. The taxable capital gain will be the difference between the selling price and your cost basis. The higher the cost basis, the less capital gain tax you will have to pay.
Your cost basis depends upon your answers to the following questions:
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• Did you deduct depreciation, make improvements, or claim tax credits on yourpersonal residence?
• Do you have any "investment in the contract" for tax-deferred annuities? • What expenses did your Commodity ETF holding gold or silver bullion incur?
Click on the navigation tabs above for your type of investment security (stocks, other assets, bonds, mutual funds, etc.) for help with these questions and for more information.
Information provided is intended solely for cash-basis U.S. citizen individual taxpayers and is believed to be accurate for most cases but is not guaranteed. Always consult your personal tax advisor about your own situation. Suggestions are most welcome. Please email our webmaster @ costbasis.com with your comments. If this website has been helpful to you, please consider making a donation to support our efforts.