Cost (Basis)

Basis is essentially your investment in a property-the amount you will subtract from the sale proceeds to determine the size of your gain or loss.

• If you purchased the property, your original basis is the amount you paid, including any commissions or "loads."
• If you received the property as a gift, your original basis typically is the donor's basis. See IRS Publication 564 if the donor's basis exceeded the property's value at the time of the gift, or if the donor paid gift tax.
• If you inherited the property, your original basis is usually the fair market value at the date of death of the previous owner. In other words, you have a taxable profit only if the asset appreciated in value after you owned it.

For mutual fund shares, there are a number of special considerations.

You may also need to adjust your original basis for:

• Sale expenses
• Stock splits and stock dividends
• Nontaxable distributions
• Original issue discount (OID) included in income