To begin, you need to know your cost basis, or the price you paid for the stock. If you did not record this information, you should have an order execution confirmation and/or an account statement that covers the date of your purchase with the purchase price. Next, you determine the stock's selling price from an order execution confirmation and/or your brokerage account statement. The difference between the buying and selling prices is your gain or loss per share, which, when multiplied by the number of shares involved, gives you a total dollar amount for the transaction. If you want to further refine this number, you can add and subtract, respectively, the brokerage commissions related to the total stock purchase amount and the total stock sale amount.

Next, if the stock is in a taxable account (non-IRA or non-retirement), you will also have to consider the tax consequences. Under the current U.S. tax code., if you hold the stock for less than one year, the capital gain/loss will be considered as short term and will be calculated as ordinary income (loss) for tax purposes. If you hold the stock for more than one year and have a capital gain, it will, in most cases, be subject to the current beneficial capital gains tax of 15%. (To learn more, read A Long-Term Mindset Meets Dreaded Capital-Gains Tax.)

Let's look at an example of making a stock gain/loss calculation. Suppose that you buy 100 shares of XYZ stock on August 1, 2016, for $20 a share and sell 50 shares of this holding 13 months later on September 1, 2017, for $25 a share. On a per-share basis, you have a long-term gain of $5 per share. Multiply this amount by 50 shares and you have a long-term capital gain (15% tax rate) of $250 (50 x $5).

Investors need to remember that if a stock splits, they must also adjust their cost price accordingly. For example, if the stock purchase price was $25 and it split 2 for 1, the cost basis would be adjusted to $12.50 per share. (To learn more, see Understanding Stock Splits.)

The Advisor Insight

The first step to figure out gains or losses is to determine the cost basis of the stock. Your cost basis is typically what you paid for the stock plus any commissions/fees you paid to buy it. For example:

You bought 10 shares of XYZ stock at $100 a share = $1,000.

You paid a $50 commission to your broker.

The total paid is $1,050, which is your cost basis. Dividing $1,050 by 10 (the number of shares you own) equals your cost basis per share.

Next, you have to adjust your basis for dividends received from the stock which were reinvested. Let's say your stock paid $100 in dividends which you then paid tax on via a Form 1099-DIV. You can now adjust your basis upwards:

$1,050 + 100 = new basis of $1,150.

The difference in proceeds from the sale will be your gain or loss.


Tom Cymer
Opulen Financial Group, LLC
Arlington, VA