Glossary/Tax and distributions

Cost Basis

Also known as Adjusted basis, Tax basis

Cost basis is the value assigned to an investment for determining gain, loss, and sometimes tax, adjusted for applicable fees, distributions, splits, transfers, and other events.

Editorially reviewed 2026-07-30

Why cost basis matters

Incorrect basis can misstate performance and taxable gain and lead to poor lot-selection decisions.

How it is applied

Investors retain trade records, identify acquisition method, allocate commissions, process corporate actions, and reconcile broker reporting.

Portfolio example

Shares bought for $10,000 with $50 acquisition cost start with $10,050 basis before later adjustments.

How to interpret it

Purchase price and adjusted basis are not always identical. Rules depend on jurisdiction and how the asset was acquired.

Limitations and common misconceptions

Gifts, inheritance, mergers, reinvestment, foreign currency, and return of capital complicate basis. Records may be incomplete.

Sources and further reading

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