UNDERSTANDING COST BASIS

Image result for capital gains

The cost basis of an investment is generally the amount you paid for it, including any commissions, fees,
reinvestments and original issue discount (OlD). It also may include adjustments for sales, principal returns, mergers, splits and spinoffs.

When an investment is used to calculate a capital gain or loss. sold or redeemed, it’s cost basis is used
to calculate a Capital gain or loss.  Tax professionals use this information to determine whether you owe any capital gains tax.

If you held the sold security for more than one year. the capital gain or loss is long-term. Long-term gains are subject to lower tax rates than ordinary income. If you held the security for one year or less, the capital gain or loss is short-term. Short-term capital gains are subject to tax at rates applicable to ordinary income. Capital losses may offset any Capital gain realized for the tax year.