Starting out
Cost basis
Also called Book cost
What you actually paid for a holding, including fees — the number every gain or loss is measured from.
How it works
Cost basis includes the purchase price plus commissions, stamp duty and any other acquisition cost. Ignoring those costs overstates every gain you ever report.
When you have bought the same investment several times, the basis depends on which purchases you are deemed to have sold. Different countries and brokers apply different rules — first in first out, average cost, or specific identification — and the choice changes the tax bill.
Where it misleads people
Corporate actions change the basis. A share split, a spin-off or a return of capital all require the original basis to be adjusted, and a broker that gets this wrong quietly misstates every gain thereafter.
Worked example
100 shares at $50 plus $10 commission gives a cost basis of $5,010, or $50.10 a share — not $50.
Related terms
- Tax lotOne purchase of a security, tracked separately with its own date and price.
- Average costTreating all purchases of one security as a single pooled holding at a blended price.
- FIFO and other lot methodsThe rule deciding which purchase you are treated as having sold, when you own several.
- Capital gainThe profit made when you sell something for more than you paid for it.
- Stock splitDividing existing shares into more, smaller shares, leaving the total value unchanged.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.