Now look at your brokerage account activity statements since your purchase date (you kept those, too, right?) and see if there have been any stock splits, exchanges, mergers, or spinoffs. The corporate website for the company whose stock you own often gives you valuable information about calculating your cost basis--look for the link to "Investors" or "Investor Relations." Follow the instructions for applying the allocation factor to your initial cost basis to arrive at your new cost basis per share after the spinoff of a new company.
If you purchased your shares from a family member or related party entity, you also have to apply the "related party" rules in determining the cost basis of your investment.
Next, you need to look at your Form 1099 reports since the date of purchase and see if any of the dividends paid by the company were classified as "return of principal" payments for tax purposes. These amounts reduce your cost basis. Return of principal payments are often seen in the cases of utility stocks, real estate investment trusts, or corporations which are paying dividends in excess of their net income.
The last step is to rule out the applicability of the "wash sale" rule. If you bought the stock again within thirty days before or after you sold it at a loss, you are not allowed to claim the loss on the sale. The loss must be added to the purchase price of the stock you bought the second time.
HELP! I DIDN"T SAVE MY TRADE CONFIRMATION!
If you don't have the original trade confirmation, a copy of the brokerage account monthly statement showing the purchase activity will suffice. Alternately, a letter from your brokerage firm confirming the date and cost is also sufficient. If you have no idea where the trade confirmation is or what it cost, but can remember approximately when the shares were purchased, you can go to the website http://bigcharts.marketwatch.com/historical/ and obtain the historical cost for that day. Take the average of the high and low trading prices for that day and use the result as your cost per share.
If the website does not list your stock because it is no longer in existence due to mergers, etc., you can try calling a public library information hotline of a large library and ask the librarian to look up the stock price trading range for that particular day in the archived newspaper files. You then have to roll the price forward by making adjustments for all stock splits and corporate spinoffs, mergers, and reorganizations since that date.
Information provided is intended solely for cash-basis U.S. citizen individual taxpayers and is believed to be accurate for most cases but is not guaranteed. Always consult your personal tax advisor about your own situation. Suggestions are most welcome. Please email our webmaster @ costbasis.com with your comments. If this website has been helpful to you, please consider making a donation to support our efforts.