How To Determine Cost Basis for Stocks
Cost basis is basically a very simple concept: it's what you paid for an investment. However, how you determine cost basis for stocks partly depends on what you want to accomplish. The procedure varies somewhat if you want to see how much money you have invested in a stock or want to find the total gain on a completed stock transaction. In addition, cost basis needs to be figured in a specific way in order to find the amount of profit eligible for capital gains tax rates.
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Instructions
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1
Review the records of the stock purchase. Add all commissions and/or transaction fees to the price you paid when you purchased the stock. The total is the amount you've invested and is equal to the simplest form of cost basis for stocks. For instance, if you bought 100 shares of a stock at $25/share (total $2500) and the purchase fees totaled $50, you've invested $2550.
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2
Determine cost basis of a completed stock investment (that is, one for which you've sold the stock) for capital gains tax purposes. Add the commissions/transaction fees for the sale of the shares to the simple cost basis figure from Step 1. In this example, if the sales costs totaled $50, add that to the $2550 for a total cost basis of $2600. To find the amount subject to capital gains tax, subtract the $2600 from the amount you received from the sale of the stock.
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3
Use cost basis to find the total gain on your investment once you've sold the stock. Start with the cost basis including sales costs (from Step 2). Add any dividends you received while you owned the stock to the sale price, and then subtract the cost basis. This is your gain on the investment. You can convert stock gain into percentage gain by dividing the stock gain by the cost basis and multiplying by 100.
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