Tax / CRA / IRSDepth 0 · Foundation
Cost Basis
What you originally paid for an asset
Cost basis is the original value of an asset used to determine capital gains or losses when sold. It can be adjusted for events like stock splits, reinvested dividends, or capital improvements.
Mental modelReference point for profit calculation
Where you'll encounter this
- →Investment tracking
- →Capital gains calculations
- →Portfolio management
- →Tax reporting on asset sales
What breaks when this is misunderstood
- ✕Incorrect gain/loss calculations
- ✕Overpaying taxes due to missing adjustments
- ✕Poor record keeping
- ✕Misreporting during audits
Signals this concept is in play
- ◆Brokerage statements showing purchase price
- ◆Capital gains reports
- ◆Transaction histories
- ◆Adjusted basis calculations