You can calculate your cost basis per share in two ways: Take the original investment amount ($10,000) and divide it by the new number of shares you hold (2,000 shares) to arrive at the new per share cost basis ($10,000/2,000=$5.00).
How is cost basis determined for inherited stock?
The cost basis for inherited stock is usually based on its value on the date of the original owner’s death, whether it has gained or lost value since he or she purchased it. If the stock is worth more than the purchase price, the value is stepped up to the value at death.
How is the cost basis of a security determined?
Cost basis is the price that you paid to purchase a security plus any additional costs such as a broker’s commission. When you sell a security, your tax liability is determined by the cost and sales price of that security. If you sell an equity security for more than the cost that you paid for, the difference will be taxed as a capital gain.
What makes up the cost basis of a stock?
For stocks or bonds, the cost basis is generally the price you paid to purchase the securities, including purchases made by reinvestment of dividends or capital gains distributions, plus other costs, such as the commission or other fees you paid to complete the transaction.
How to calculate cost basis for inherited stock?
You calculate the cost basis for inherited stock by determining the value of the stock on the date that the person in question died, unless the person’s estate chose what’s known as the alternate valuation date, which is six months after the date of death. In many cases, that can be much different from the deceased person’s cost basis before death.
How are capital gains and cost basis calculated?
The basis step-up Capital gains taxes are calculated based on the profits after the return of capital (ROC). This means that investors will have a tax liability when they sell a stock for an amount greater than the ROC basis — or the cost at which the equity was acquired. The rules behind inherited stock and cost basis are simple.
