Cost basis is generally the amount paid for an asset, adjusted when tax rules require it; gain or loss starts with amount realized minus adjusted basis. If shares cost $4,020 including a $20 commission and sell for $5,000, the simplified gain is $980, not $1,000 calculated from the $4,000 trade price alone.
What cost basis capital gains means
Cost basis is the amount used to measure gain or loss when an asset is sold, often the purchase cost plus eligible acquisition costs and later adjustments. The capital-gains estimator applies a rate to a gain entered by the user; cost basis establishes the gain input before any rate is considered.
| Share purchase | $4,000 |
|---|---|
| Purchase commission | $20 |
| Illustrated basis | $4,020 |
| Sale proceeds | $5,000 |
| Simplified gain | $980 |
Cost basis: what it is and why it changes a capital-gains result: worked example
A buyer acquires 100 shares at $40 for $4,000 and pays a $20 commission. The starting basis is $4,020 in this illustration. Selling the lot for $5,000 before sale costs produces $980 of gain: $5,000 minus $4,020. A stock split, reinvested distribution, return of capital, wash-sale adjustment, or sale fee can require a different record.
How to calculate cost basis capital gains
Keep each lot's acquisition date, quantity, purchase amount, commissions, adjustments, and disposition record. For the basic calculation, gain or loss = amount realized minus adjusted basis. A calculator can test arithmetic; the broker statement and tax rules determine reportable basis.
Use the relevant inputs with these related Calculatort pages: capital-gains estimator · average share-cost tool · investment return calculation.
Read the numbers before making a decision
Share purchase check 1. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 1 when it examines share purchase at $4,000, purchase commission at $20, and illustrated basis at $4,020. Identify the unit for share purchase in pass 1 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 1, recording the changed share purchase makes the result traceable rather than a headline number.
Purchase commission check 2. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 2 when it examines purchase commission at $20, illustrated basis at $4,020, and sale proceeds at $5,000. Identify the unit for purchase commission in pass 2 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 2, recording the changed purchase commission makes the result traceable rather than a headline number.
Illustrated basis check 3. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 3 when it examines illustrated basis at $4,020, sale proceeds at $5,000, and simplified gain at $980. Identify the unit for illustrated basis in pass 3 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 3, recording the changed illustrated basis makes the result traceable rather than a headline number.
Sale proceeds check 4. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 4 when it examines sale proceeds at $5,000, simplified gain at $980, and share purchase at $4,000. Identify the unit for sale proceeds in pass 4 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 4, recording the changed sale proceeds makes the result traceable rather than a headline number.
Simplified gain check 5. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 5 when it examines simplified gain at $980, share purchase at $4,000, and purchase commission at $20. Identify the unit for simplified gain in pass 5 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 5, recording the changed simplified gain makes the result traceable rather than a headline number.
Share purchase check 6. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 6 when it examines share purchase at $4,000, purchase commission at $20, and illustrated basis at $4,020. Identify the unit for share purchase in pass 6 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 6, recording the changed share purchase makes the result traceable rather than a headline number.
Purchase commission check 7. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 7 when it examines purchase commission at $20, illustrated basis at $4,020, and sale proceeds at $5,000. Identify the unit for purchase commission in pass 7 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 7, recording the changed purchase commission makes the result traceable rather than a headline number.
Illustrated basis check 8. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 8 when it examines illustrated basis at $4,020, sale proceeds at $5,000, and simplified gain at $980. Identify the unit for illustrated basis in pass 8 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 8, recording the changed illustrated basis makes the result traceable rather than a headline number.
Sale proceeds check 9. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 9 when it examines sale proceeds at $5,000, simplified gain at $980, and share purchase at $4,000. Identify the unit for sale proceeds in pass 9 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 9, recording the changed sale proceeds makes the result traceable rather than a headline number.
Simplified gain check 10. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 10 when it examines simplified gain at $980, share purchase at $4,000, and purchase commission at $20. Identify the unit for simplified gain in pass 10 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 10, recording the changed simplified gain makes the result traceable rather than a headline number.
Share purchase check 11. A tax-lot worksheet preserves what was paid and every adjustment connected with that particular property; a market quote cannot reconstruct those records on pass 11 when it examines share purchase at $4,000, purchase commission at $20, and illustrated basis at $4,020. Identify the unit for share purchase in pass 11 before changing a number: dollars, shares, months, a percentage, or a tax category. In check 11, recording the changed share purchase makes the result traceable rather than a headline number.
Common mistakes
Do not use current market value as basis, discard trade confirmations, combine lots with different acquisition dates without knowing the chosen identification method, or assume a broker's reported figure covers every adjustment.
Where this calculation stops
Gifts, inheritances, options, mutual-fund elections, splits, wash sales, depreciation, sale expenses, and account transfers can alter the applicable basis. Tax reporting needs current records and rules.
Source and verification
IRS Topic 703 says basis is generally the amount paid for an asset, including purchase-connected costs, and that events can increase or decrease adjusted basis. Read the named source. For this illustration, verify the source date and the controlling record for share purchase before relying on the result.