There are several issues that come up when numerous investments have been made. The Internal Revenue Service (IRS) says if you can identify the shares that have been sold, their cost basis can be used. For example, if you sell the original 1,000 shares, your cost basis is $10.

Which is an example of a cost basis?

Cost basis refers to the original price of an asset. Cost basis is sometimes called tax basis. How Does Cost Basis Work? Let’s assume you purchase 100 shares of XYZ Company stock for $5 per share, and you pay a $10 commission for the purchase. Your cost basis would be:

How to calculate your cost basis per share?

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). Take your previous cost basis per share ($10) and divide it by the split factor of 2:1 ($10.00/2 = $5).

How does a stock split affect your cost basis?

How Stock Splits Affect Cost Basis. If the company splits its shares, this will affect your cost basis per share, but not the actual value of the original investment or the current investment. Continuing with the above example, suppose the company issues a 2:1 stock split where one old share gets you two new shares.

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). Take your previous cost basis per share ($10) and divide it by the split factor of 2:1 ($10.00/2 =$5.00).

Do you use the basis of the shares you bought first?

You use the basis of the shares you acquired first as the basis of the shares sold. In other words, you sold the oldest shares you owned first. You need to have kept adequate documentation of all your purchases, including those that were made through the dividend reinvestment plan, in order to establish the basis of these shares.

What is the cost basis of Nike stock?

For instance, if you buy 100 shares of Nike at $50 a share and pay $10 in commission, your cost basis per share is actually $50.10 a share. The reverse is true for net proceeds – if you sell 100 shares of Nike at $50 a share and pay $10 in commission, your net proceeds for tax purposes is actually $4,990.