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Definition of 'Cost Basis'
1. 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. Also known as "tax basis".
2. The difference between the cash price and the futures price of a given commodity.
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Investopedia explains 'Cost Basis'
1. Using the correct tax basis is important especially if you reinvested dividends and capital gains distributions instead of taking the earnings in cash. Reinvesting distributions increases the tax basis of your investment, which you must account for in order to report a lower capital gain (and therefore pay less tax). If you don't use the higher tax basis, you could end up paying taxes twice on the reinvested distributions.
For example, say you bought 100 shares of a stock for $1,000 last year and you reinvested the $100 of dividends distributed from the company. The next year, you received $200 in dividends and capital-gains distributions, which you again reinvested. Since tax law considers these reinvested earnings as paid to you even though you didn't actually have the cash in hand, your adjusted cost basis when the stock is sold should be recorded at $1,300 instead of the original purchase price of $1,000. Thus, if the sale price is $1,500, the taxable gain would only be $200 ($1,500 - $1,300) instead of $500 ($1,500 - $1,000). If you record the cost basis as $1,000, you'll end up paying more taxes than you have to.
2. For example, if particular corn futures contract happens to be trading at $3.50, while the current market price of the commodity today is $3.10, there is said to be a $0.40 basis.
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Search results for 'Cost Basis'
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http://www.investopedia.com/ask/answers/05/costbasis.asp
The cost basis of any investment is the original value of an asset adjusted for
stock splits, dividends and capital distributions. It is used to. ...
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http://www.investopedia.com/exam-guide/series-65/taxation/holding-period-cost-basis.asp
In this section cost basis, stepped-up cost basis and receiving investment
as a gift. ... Taxation Issues - Holding Period and Cost Basis. ...
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http://www.investopedia.com/ask/answers/06/mutualfundcostbasis.asp
... How do you calculate the cost basis for a mutual fund over an extended time period? ...
Your cost basis now becomes $8.1290 ($1008/124 shares owned). ...
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http://www.investopedia.com/ask/answers/03/112703.asp
... Order Reprints Reprints. Feedback Feedback. My recently deceased spouse's IRA has
been rolled over into mine. Does the cost basis change for me? ...
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http://www.investopedia.com/articles/mutualfund/cost-basis-mutual-funds.asp
... For those of you that are taking a passive approach on tracking your cost basis,
it is possible that one of the following results could have ended up on your ...
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http://www.investopedia.com/articles/basics/07/ml_partnerships.asp
... Unlike dividends, these distributions are not taxed when they are received; instead,
they are considered reductions in the investment's cost basis and create a ...
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http://www.investopedia.com/articles/pf/06/mortgagepoints.asp
... Some of the greatest challenges of owning a home come in the form of the tax
regulations that relate to points and cost basis. ... Adjusted Cost Basis: $314,000. ...
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http://www.investopedia.com/articles/05/taxlots.asp
The method of identifying cost basis can help you
to get the most out of reduced tax rates. ...
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http://www.investopedia.com/articles/retirement/05/nondeductibleIRA.asp
... How to Handle Distributions If it turns out that there are non-deductible contributions
in any of your Traditional IRAs, you have a cost basis in those funds. ...
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http://www.investopedia.com/articles/05/021405.asp
We provide an explanation of individual cost basis and the advantages it brings
to these accounts. ... You do not have individual cost basis on those securities. ...
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