Cost Basis & Tax Lots
Cost basis is the original value of an asset that is used to calculate capital gain or loss for tax purposes. For most positions, your cost basis will be the purchase price plus any commissions, and it will be adjusted for wash sales, corporate actions and/or return of capital that occur during the time you hold it.
Cost Basis Example - Stock Split
You buy 100 shares of XYZ stock for $5 per share. Your online commission was $7 for the transaction, so your cost basis is $507. While you hold the shares, Company XYZ issues a 2-for-1 stock split, meaning you now hold 200 shares of XYZ. Your cost basis in the position is still $507 total, but your per-share cost basis has changed, and this will be important if you decide to sell all or part of your holdings. Divide $507 by 200 shares to arrive at your new per-share cost basis of $2.54. If you sell 50 shares at $3.50, your capital gains from the sale will be calculated using the adjusted cost basis of $2.54, not your original purchase price of $5.
You can have multiple tax lots for the same security. For example, consider the XYZ example above. If your original purchase of 100 shares of XYZ was made on Monday, and you also bought 100 more shares of XYZ on Tuesday, each of these transactions will be assigned a different tax lot number even though they both involve shares of the same stock.
Partial fills are averaged into a single tax lot. For example, you place a market order for 500 shares of XYZ when each share is selling for around $10. Your order is filled in pieces: 100 shares at $9.99, 200 shares at $10.01 and 200 shares at $10.02. At the end of the trading day when all orders are processed, these three fills will be rolled up into a single tax lot with an average price of $10.01. This average price will be used to calculate your cost basis.
Tracking Your Cost Basis
The cost basis of a particular tax lot is required to be reported to you and the IRS via the revised Form 1099-B. If you made equity purchases in 2011 and later with another brokerage and transfer them to Scottrade, your cost basis information will be retained in the transfer. Similar requirements are in place for mutual funds and ETFs purchased in 2012 and later, for options, fixed-income and other securities in 2014 and later and for more complex fixed-income securities and options issued as a part of a fixed-income instrument in 2016 and later.
Finding Your Cost Basis & Tax Lot Number
After a transaction has been processed, you can find its tax lot number by clicking the My Account tab in your account and choosing Order Status from the left menu. Your tax lot number and details of any partial fills, cancels or rebills will be available in the Completed Orders section.
Your cost basis for tax purposes is available in the Ledger section of Gain/Loss & Tax Center. Remember, for any positions entered before Jan. 1, 2011, especially those transferred from another firm, it is your responsibility to ensure you are providing accurate cost basis information to the IRS.
Scottrade does not provide tax advice. The material provided is for informational purposes only. Please consult your tax, or legal, advisor for questions concerning your personal tax or financial situation.