1. What is Cost Basis of Stock?

Cost basis represents the total original investment in a stock, including the purchase price and any associated fees or commissions. It is a crucial figure for calculating capital gains or losses when the stock is sold.

2. How Does the Calculator Work?

The calculator uses the cost basis formula:

Where:

• \( CB \) — Cost Basis ($)
• \( \text{Purchase Price} \) — Original stock purchase price ($)
• \( \text{Fees} \) — Brokerage fees, commissions, and other transaction costs ($)

Explanation: The cost basis includes all costs directly associated with acquiring the stock, providing the true investment amount for tax and performance tracking purposes.

3. Importance of Cost Basis Calculation

Details: Accurate cost basis calculation is essential for determining taxable capital gains, making informed investment decisions, and tracking portfolio performance over time.

4. Using the Calculator

Tips: Enter the purchase price in dollars and any associated fees. Both values must be non-negative numbers. The calculator will provide the total cost basis.

5. Frequently Asked Questions (FAQ)

Q1: Why is cost basis important for investors?
A: Cost basis determines the taxable gain or loss when selling investments and helps track the true performance of your investment portfolio.

Q2: What fees should be included in cost basis?
A: Include all transaction costs such as brokerage commissions, transfer fees, and any other direct costs of acquisition.

Q3: How does cost basis affect taxes?
A: When you sell stock, the difference between selling price and cost basis determines your capital gain (taxable) or capital loss (potentially deductible).

Q4: Does cost basis change over time?
A: The original cost basis remains constant unless adjusted for stock splits, dividends reinvested, or other corporate actions.

Q5: How is cost basis different for mutual funds?
A: Mutual fund cost basis may include load fees and must account for dividend reinvestments, making it more complex than single stock purchases.