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. Managing Wealth

    What Determines Your Cost Basis?

    The cost basis is the initial price paid in an exchange for a product or service.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. Taxes

    Do You Have to Pay Taxes on Home Sales?

    Taxes are only paid on home sales if your proceeds exceed a certain amount.
  7. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your capital gain tax burden.
  8. Trading

    Figuring Out a Stock Investment’s Cost Basis

    An investment’s cost basis is basically the total amount invested, plus any commissions.
  9. Managing Wealth

    Know Your Stock Cost Basis

    A stock’s cost basis is its purchase price plus all reinvested dividends and commissions.
Hot Definitions
  1. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  4. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  5. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
  6. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
Trading Center