1. What Is Original Cost Basis?

Original cost basis represents the total initial investment in an asset, including all acquisition costs. It's the starting point for calculating capital gains or losses when the asset is sold.

2. How Does The Calculator Work?

The calculator uses the cost basis formula:

Where:

• \( Purchase\ Price \) — Original price paid for the investment
• \( Commissions \) — Brokerage fees and transaction costs
• \( Returns \) — Any returns, rebates, or reimbursements received

Explanation: This formula accounts for all costs associated with acquiring an investment, providing the true initial investment amount for tax and accounting purposes.

3. Importance Of Cost Basis Calculation

Details: Accurate cost basis calculation is essential for determining capital gains taxes, tracking investment performance, and making informed financial decisions. It affects tax liability when assets are sold.

4. Using The Calculator

Tips: Enter purchase price in USD, commissions in USD, and any returns in USD. All values must be non-negative numbers. The calculator will compute your original cost basis.

5. Frequently Asked Questions (FAQ)

Q1: Why is cost basis important for investors?
A: Cost basis determines taxable gains or losses when you sell an investment. A higher cost basis means lower taxable gains and less tax liability.

Q2: What costs can be included in cost basis?
A: Purchase price, commissions, legal fees, transfer taxes, and other direct acquisition costs can typically be included in cost basis calculations.

Q3: How does cost basis affect capital gains?
A: Capital gain = Sale price - Cost basis. A accurate cost basis ensures proper calculation of short-term or long-term capital gains for tax purposes.

Q4: Can cost basis change over time?
A: Yes, through events like stock splits, dividends reinvested, or capital improvements (for real estate), which adjust the original cost basis.

Q5: What's the difference between original and adjusted cost basis?
A: Original cost basis is the initial investment amount, while adjusted cost basis includes subsequent adjustments from corporate actions or improvements.