Stocks (Options, Splits, Traders)
Question: How do I figure the cost basis when the shares I'm selling were purchased at various times and at different prices?
The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. If you acquired these securities other than by purchase, your basis is usually determined by fair market value or the previous owner’s adjusted basis. When selling securities, you should be able to identify the specific shares to be sold.
If you can identify which shares of stock you sold, your basis generally is:
- What you paid for the shares sold plus any costs of purchase.
- The total of all the acquisition costs of all the shares sold if you sell a block of the same kind of stock and you report all the shares sold at the same time as one sale.
If you cannot adequately identify the shares you sold and you bought the shares at various times for different prices, the basis of the stock sold is:
- The basis of the shares you acquired first (first-in first-out). Except for certain mutual fund shares and certain dividend reinvestment plans, you cannot use the average price per share to figure gain or loss on the sale of stock.
You are required to keep and maintain records that identify the basis of all capital assets. If you do not have adequate records to document the basis, the IRS requires you to treat your basis as zero.
- Tax Topic 409, Capital Gains and Losses
- Publication 17, Your Federal Income Tax (For Individuals), Chapter 1, What Records Should I Keep?
- Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
Category: Capital Gains, Losses, Sale of Home
Subcategory: Stocks (Options, Splits, Traders)