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Investing Specialists

Give Due Care to Your Cost-Basis Elections

With investors being pressed to make cost-basis elections, here's an overview of key choices.

The arcane business of calculating each of your investments' cost basis is getting easier, provided you have a full understanding of the choices you're about to make.

At the most basic level, cost basis is simply the amount you've paid for an asset. The difference between your cost basis and the price at which you sell that asset is used to determine the amount of capital gains tax you owe on the transaction. For stocks, bonds, and funds, your cost basis will be adjusted for any commissions you paid as well as stock splits (for individual stocks) and reinvested dividends and capital gains (for funds).