Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• COST BASIS
  
  The cost basis is the original price of an asset usually the purchase price plus commissions which you use to calculate capital gains and capital losses, depreciation, and return on investment. If you inherit assets, such as stocks or real estate, however, your cost basis is the asset's value on the date the person who left it to you died (or the date on which his or her estate was valued). This new valuation is known as a step up in basis. For example, if you buy a stock at $20 a share and sell it for $50 a share, your cost basis is $20. If you sell, you owe capital gains tax on the $30-a-share profit. However, if someone left you stock that was bought at $20 a share but was valued at $50 a share when that person died, your cost basis would be $50 a share, and you would owe no tax if you sold it at that price. Formula: Original purchase price + Commission = Cost basis
  
  Back