Cost basis is the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset’s cost basis and the current market value.

How do I find the cost basis of a mutual fund?

To calculate average basis:

1. Add up the cost of all the shares you own in the mutual fund.
2. Divide that result by the total number of shares you own. This gives you your average per share.
3. Multiply the average per share by the number of shares sold.

What is included in cost basis of stock?

In any transaction between a buyer and seller, the initial price paid in exchange for a product or service will qualify as the cost basis. The equity cost basis is the total cost to an investor; this amount includes the purchase price per share plus reinvested dividends and commissions.

Is cost basis reported to the IRS?

You—the taxpayer—are responsible for reporting your cost-basis information accurately to the IRS. You do this in most cases by filling out Form 8949. (For tax history junkies, this form replaced the Form 1040 Schedule D-1 in tax year 2011 for most cost-basis reporting.) But fear not.

What does it mean to have cost basis in mutual funds?

Cost basis is the original monetary amount paid for shares of a security. When you sell or exchange shares of mutual funds or other securities, you may have a capital gain or loss that must be reported to the IRS. To calculate the gains or losses from shares sold, you must know the cost of the different shares that you own.

What happens to cost basis when you sell stock?

If an investor sells the stock, cost basis becomes the purchase price on the date the gifter bought the stock, unless the price is lower on the date of the gift. If this is the case, the tax cost can be reduced, since the stock has suffered a loss in value.

Where can I find cost basis for my investments?

Verify that your custodian records cost basis. You will usually find this information on their website. The records may be listed as cost basis or gains/loss. Save a copy of your gains/loss reports before transferring accounts from one custodian to another. While you are checking on your records, establish a way to track all your investments.

How to calculate cost basis for inherited stock?

Calculating the cost basis for inherited stock is done by taking the average price on the date of the benefactor’s death. Conversely, a gifted stock is more complicated. If an investor sells the stock, cost basis becomes the purchase price on the date the gifter bought the stock, unless the price is lower on the date of the gift.