How to Figure Profit on Stock Purchases

You enjoy buying and selling on Wall Street, but at the end of the day, all you really want to know is how much you made on the stock market.

Things You'll Need

• IRS Forms
• Financial Calculator
• Brokerage Accounts

Instructions

1. Obtain a confirmation statement from your broker after you sell shares. The statement indicates the number of shares sold, the sale price, which shares were sold, the amount paid in commissions and other data.

2. Review the information carefully.

3. Make sure the correct shares were sold. If you owned 100 shares of stock that you bought over a period of years, the broker generally will sell the shares on a "first in, first out" basis. That means the first stock acquired will be the first one sold. (If you wanted the shares sold in a different sequence, you should have told the broker before the sale occurred.)

4. Note the amount you paid for each share sold, and the broker's commission for the sale.

5. Determine the amount you paid in state transfer fees when selling the shares.

6. Add the purchase price, the broker's commission and the transfer fees to determine the "tax basis" of the stock.

7. Subtract the tax basis amount from the price at which you sold the shares. This is your profit (or loss) on the stock.

Tips & Warnings

• At the end of the year, you'll receive a 1099-B form from the Internal Revenue Service. This form indicates the date of the sale of your stock and the amounts you received (less brokers' commissions). Make sure it squares with the information contained in the brokers' confirmation statements.

• When filing taxes, you'll use Schedule D to report profits or losses on the sale of securities.