Your cost basis in stock is the amount you pay for shares, plus certain expenses you incur to acquire and manage your investments. Your basis is the cornerstone figure you use when calculating the gains or losses when you sell your stock. In most cases, your investment broker gives you information about your basis and number of shares sold when you trade or dispose of stock, but if you don’t receive this information or have lost it, you can still find historical stock price data and calculate your cost basis.
Step 1
Ask your broker for your basis information. If you don't have a broker, or are unable to get replacement basis information from him, go to an investment website that provides historical price information, such as Yahoo! Finance or the Wall Street Journal’s Market Watch site. Some sites provide historical data links within the profile for the company you're searching, and other sites have specific areas dedicated to historical data.
Step 2
Enter the name of the corporation or the ticker symbol in the search field. Enter the date you purchased stock.
Step 3
Review results. Historical price information includes the low and high trading price for the day. Add the low and high numbers together and divide by two. The result is your initial per-share cost basis on the date of purchase. Multiply the per-share cost by the number of shares you bought and add any commissions or fees you pay to acquire or maintain your investment. The result is your total cost basis. If your stock has not split and you’ve never received any dividends, divide your total cost basis by the number of shares you purchased to calculate your new per-share basis. Using the total cost basis allocates your commission and fee costs to each share.
Step 4
Account for splits. If the shares you purchase split between your purchase and sell dates, your total cost investment doesn’t change, but your per-share basis does. Divide your total cost basis – the amount you paid to acquire all shares within a lot – by the number of shares you have after the split. The result is your new cost-per share. For example, if you purchase 100 shares of stock that each cost $10, you pay $1,000 for the lot. If the stock has a 2 for 1 split, you’ll then have 200 shares of stock. You don’t pay any more money for the split shares, so your initial investment hasn’t changed. In this instance you’ll divide your $1,000 investment by 200. Your new cost basis per share is $5. This becomes important when you sell some of the shares in your lot.
Step 5
Account for dividends. If you receive reinvested dividends, your dividends are used to purchase additional shares of stock. This has a similar effect on your per-share basis as splits. Add the value of your reinvested dividends to your total investment cost. Divide the result by the number of shares you have to determine your new per-share basis. Non-dividend distributions have a different effect on basis, and are considered a return on your investment. If you receive non-dividend distributions, reduce your investment cost by the distribution amount and divide the result by the number of shares you own.
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Tips
- As of 2012, brokers are required to report your cost basis on Form 1099-B when you sell or dispose of your stock. However, this rule only applies to covered securities purchased for cash after a certain date, or certain stock acquired by dividend, split or transfer. Basis amounts shown in Box 3 of your 1099-B may be incomplete or incorrect. Contact your broker, or use historical price data to confirm your cost basis. If you report incorrect basis, your reportable gain or loss on the sale will also be incorrect.
Writer Bio
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.