# 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.

## Tax Lots

In your Scottrade® account, the cost basis for each of your tax lots is tracked with a unique number called the tax lot number.

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.