Cost Basis

Cost basis is the original amount paid for a security that has been adjusted for wash sales and corporate actions. Cost basis is used to determine capital gains and losses.

If an investor cannot document when the security was purchased or how much the security cost, the IRS requires investors to use a cost basis of $0. However, try to get some information about the position in question by contacting the broker you purchased the security from or by looking through old monthly and year end statements to pinpoint a time period when the cost basis can be estimated. The IRS accepts accurate cost basis estimates as long as investors can document how they arrived at their conclusion.

How GainsKeeper Can Help with Cost Basis

GainsKeeper can help with cost basis calculations. Investors enter original buy and sell transactions into GainsKeeper. GainsKeeper will then automatically match sell transactions against appropriate tax lots, and adjust positions and cost basis for corporate actions and wash sales.

When importing trade information from some brokers, users may receive baseline positions. These are positions that investors held open at the time their brokers sent their trade data. In order for GainsKeeper to accurately calculate gain/loss figures, users need to input their cost basis and purchase dates for these baseline positions. After this one time baseline, GainsKeeper will automatically adjust basis and gain/loss for all trades, wash sales and corporate actions so users will not have to worry about their cost basis again.