For tax purposes, your basis is the amount of your investment in a stock or mutual fund. You need to know the basis of the stock or mutual fund so that you can figure the amount of capital gain or loss you realize when you sell it. For most property you purchase, your basis is usually the amount you paid for the item (cost), including any commissions or fees that you paid.
If you received stock or shares of a mutual fund as a gift, then the basis is usually the amount the person who gave it to you paid for it. There are some situations, however, when the basis might be equal to the fair market value on the day you received the gift. This might happen if you’re selling the stock or shares of a mutual fund at a loss. For more information, see the "Sale of Property" chapter in IRS Publication 17: Your Federal Income Tax.
If you inherited stock or shares of a mutual fund, the basis is usually the fair market value of the property on the day the person who bequeathed it to you died. In some cases, though, the cost of the stock or mutual fund is equal to the fair market value determined on a day other than the date of death. To learn more, see the "Sale of Property" chapter in IRS Publication 17: Your Federal Income Tax.
For more information on situations that might affect basis, see these topics: