Cost basis

Cost basis,

Definition of Cost basis:

  1. At the most basic level the cost basis of an investment is the total amount originally invested, plus any commissions or fees involved in the purchase. This can either be described in terms of the dollar amount of the investment, or the effective per share price paid for the investment.

  2. Accounting: Original price of an asset or property, plus purchasing expenses, plus cost of permanent (long term) improvements, plus other costs (if any), less accumulated depreciation.

  3. Cost basis is the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value. The term can also be used to describe the difference between the cash price and the futures price of a given commodity.

  4. Tax assessment: Original or (in case of an inheritance) appraised value of an asset used in computing capital gains.

How to use Cost basis in a sentence?

  1. Cost basis is the original price that an asset was acquired, for tax purposes.
  2. Several accounting methods exist to adjust the cost basis so that it is more favorable, but be careful to follow IRS guidelines.
  3. Capital gains are computed by calculating the difference from the sale price to the cost basis.

Meaning of Cost basis & Cost basis Definition