How do I determine the cost basis of stock I received as a gift?

The cost basis of stock you received as a gift (“gifted stock”) is determined by the giver’s original cost basis and the fair market value (FMV) of the stock at the time you received the gift. If the FMV when you received the gift was more the original cost basis, use the original cost basis when you sell.

Can I use average cost basis for stocks?

Average Cost — Double Category (ACDC) It may not be used to figure the cost basis when selling individual bonds and stocks. There will be one number for shares held over a year (long-term shares) and another total for shares held under 12 months (short-term shares).

What is the cost basis for inherited stock?

The cost basis for inherited stock is usually based on its value on the date of the original owner’s death, whether it has gained or lost value since he or she purchased it. If the stock is worth more than the purchase price, the value is stepped up to the value at death.

What is the cost basis for selling stock?

For tax calculation purposes, the adjusted cost basis when the stock is sold will be recorded at $1,300 instead of the original purchase price of $1,000. Thus, if the sale price is $1,500, the taxable gain would only be $200 ($1,500 – $1,300) instead of $500 ($1,500 – $1,000).

How is the cost basis of an asset calculated?

Cost basis is the original value of an asset for tax purposes, adjusted for stock splits, dividends and return of capital distributions.

What is the cost basis of a gift?

Cost Basis of Gifted or Inherited Shares. In the event the shares were given to you as a gift, your cost basis is the cost basis of the original holder who gave you the gift. If the shares are trading at a lower price than when the shares were gifted, the lower rate is the cost basis.

How to calculate cost basis for inherited stock?

Calculating the cost basis for inherited stock is done by taking the average price on the date of the benefactor’s death. Conversely, a gifted stock is more complicated. If an investor sells the stock, cost basis becomes the purchase price on the date the gifter bought the stock, unless the price is lower on the date of the gift.