Adjusted basis is the original cost of an item adjusted for certain events that may increase or decrease your basis. These events include:
Undistributed capital gains (Form 2439). This only affects the basis of mutual funds. If you receive a Form 2439 from your mutual fund company, increase your basis by the difference between the amount included in income (box 1a) and the credit for taxes paid (box 2). For details, see Undistributed Capital Gains.
Return of capital (nontaxable) distributions. Reduce your basis (but not below zero) by the amount of any "return of capital" (nontaxable) distributions that you receive from the mutual fund or stock. These kinds of distributions are shown in box 3 of Form 1099-DIV. They are not the same as capital gain distributions or exempt-interest dividends. For details, see Nontaxable Distributions.
Wash sales. Increase the basis by the amount of loss you can’t claim due to wash sale rules. For details, see Wash Sales.
Stock dividends. This only affects the basis of stock. Decrease the basis of the stock you hold based on the stocks you received as a dividend. For details, see Stock Dividends.
Stock splits. Again, this only affects the basis of stock. Decrease or increase the basis of stock you hold based on the stock split. If you received more shares, your basis will decrease. If you now own fewer shares due to a "reverse split," then you need to increase your basis. For details, see Stock Splits.