For investors that purchase stocks or bonds, the cost basis will usually refer to the price paid for certain security, reinvestment amounts of dividends, capital gains distribution, or any other costs, fees, and commissions included in the transaction.
For the sake of the investor, and to simplify matters, a broker or fund manager will issue a cost basis form to investors once they have finalized the purchase of a security to ensure they have the necessary information at hand when the investors require to issue a claim or loss for tax purposes.
The cost basis can be found on the confirmation letter exchanged between you, the investor, and the fund or brokerage manager.
Important things to remember:
Simply put, the cost basis model is used to help determine either a profit or loss on a specific asset or security, and whether to determine it’s liable for tax.
In some cases, when a business is sold, both the profit and losses of capital assets will need to be determined separately by using a cost basis asset model.
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