Next video:
Loading the player...

The term “cost basis” refers to the original value of a security you own. When you sell a stock, bond or mutual fund, you use the cost basis to determine your profit or loss, which in turn affects the amount of tax you owe.
 
Multiple methods can determine one’s cost basis: 1.  First in, first out method or FIFO. 2. Specific identification method 3. Average basis

Related Articles
  1. Investing

    Don't Lose Your Shirt On Mutual Fund Sales

    Mutual funds aren't guaranteed profit-makers, but with the right calculations and timing, you can avoid major losses.
  2. Managing Wealth

    What Determines Your Cost Basis?

    In any transaction between a buyer and seller, the initial price paid in an exchange for a product or service will qualify as the cost basis. When it comes to securities and related financial ...
  3. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  4. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  5. Taxes

    Morgan Stanley Tax Mix Up, or Why You Need to Know Your Cost Basis

    Morgan Stanley's error is a reminder to track the cost basis of your investments.
  6. Small Business

    Understanding First In, First Out (FIFO)

    A company that uses the first in, first out inventory valuation method will sell, use, or dispose of assets that it produced or acquired first.
  7. Financial Advisor

    The Basics of Income Tax on Mutual Funds

    Learn about the basics of income tax on mutual funds, including what types of income may be subject to the capital gains tax rate.
  8. Small Business

    Build Your Small Business During Downswings

    Here we offer some cost-saving measures to strengthen your business even when the market is weak.
  9. Investing

    Know Your Cost Basis For Bonds

    Nobody likes taxes, but tax reporting is an inevitable and unavoidable part of investing. If you buy stock, determining your costs basis is a slightly frustrating but fairly straightforward exercise. ...
Hot Definitions
  1. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  2. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  3. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  4. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  5. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  6. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
Trading Center