How to Find Cost Basis of Old Stock

Determining the cost basis of old stock can be challenging, especially when purchase records are missing. Investors can check brokerage statements, company investor relations pages or IRS guidelines to reconstruct their cost basis. If records are unavailable, the IRS allows the use of the first-in, first-out method or an average cost approach for mutual funds. This ensures a reasonable estimate based on available data. A cost basis estimator can also help by using historical stock prices, dividend reinvestment data and corporate actions like splits and mergers to approximate the original purchase price.

A financial advisor can help you build and manage a portfolio of investments.

What Is Cost Basis?

Cost basis is the original purchase price of an asset. When you buy securities like stocks and mutual funds, your cost basis is the price you pay on the date of purchase.

Cost basis includes several parts:

• Asset price
• Brokerage fees
• Mutual fund load fees
• Any applicable trading costs

There are several reasons why you may need to determine the cost basis of old stock or other assets. You can use the cost basis to estimate how much of a capital gain you might realize by selling stocks that have increased in value. This can be useful when weighing whether to sell now or hold onto your investments a little longer.

Capital gains from the sale of stocks or other investments are taxable under IRS rules. You may owe taxes one of two ways:

• Short-term capital gains. The short-term capital gains tax rate applies to investments held for less than one year.
• Long-term capital gains. You’ll pay the more favorable long-term capital gains tax rate for investments held longer than one year.

Cost basis can also tell you how much capital loss you might realize if you’re selling stocks that have dropped in value. The IRS allows investors to deduct up to $3,000 in capital losses from ordinary income each year, or $1,500 if married and filing separate returns. ¹

How to Find the Cost Basis of Old Stock

To find the cost basis of old stock, you first must know what you paid for it. This task may be simple, depending on when you purchased the investment.

IRS Reporting

The tax code requires brokerages to report your cost basis to the IRS when you sell an investment. However, this only applies if you purchase the investment on or after specific dates.

For example, reporting is required if your purchase meets these dates.

Cost basis is reported on IRS Form 1099-B. ² If you receive this tax form and the cost basis box is empty, there are other ways to find the cost basis for old stock.

Brokerage Reporting

You can log in to your brokerage account and review your transaction statements for the time period when you purchased the stock. Keep in mind that if you bought shares of the same stock on different dates, you may need to review multiple statements or transaction confirmations.

If you can’t find the information you need online, try calling your brokerage directly to see if they can provide some numbers for you. You can also look through historical stock pricing data to find the stock’s average price for the day you bought it.

If that fails, you may be able to get historical price data directly from the company.

How to Calculate Cost Basis

There are a couple of ways to approach accounting when determining the cost basis of old stock.

First-In, First-Out

First, there is the First-In, First-Out (FIFO) method. This is usually a good idea if you bought multiple shares of the same stock on different dates.

If you’re calculating the cost basis using the First-In, First-Out rule, you will use the initial price you paid for the shares. This method assumes that the shares you purchase first are the ones you pay the least for.

Say you buy 100 shares of stock in XYZ company on March 1, then again on July 1 and once more on October 1 of the same year. You pay $100 per share in March, $125 per share in July and $140 per share in October. The First-In, First-Out method uses the $100-per-share price you paid back in March to calculate your cost basis for any shares you sell.

First-In, First-Out is a simple way to calculate cost basis, but it can result in a larger capital gain on paper. This could mean you owe more in taxes when selling stocks at a profit.

Some brokerages automatically calculate the cost basis using this method unless you choose a specific identification method.

Specific Identification Method

The specific identification method allows you to choose which shares of stock are sold based on the original purchase price.

Using the previous example, you could decide which price point ($100, $125 or $140) to use when calculating your cost basis.

This method could potentially help you avoid tax by minimizing capital gains. However, it does require a little more homework on your part.

You must know what you paid for the stocks each time you purchased them. You must also specify to your broker which shares to sell. For example, you could tell your broker to sell 100 shares of XYZ stock that you purchased on March 1 at $100 each.

Using a Cost Basis Estimator

If it’s too overwhelming to track down old brokerage statements or manually reconstruct stock prices, a cost basis estimator can simplify the process. Many online tools allow investors to enter stock symbols, purchase dates and dividend reinvestment options to generate an estimated cost basis.

Some brokerages provide cost basis calculators on their platforms, while third-party financial websites offer similar tools with historical price data and corporate action adjustments.

For example, Omni Calculator’s Stock Average Calculator can help you determine the average share price paid when shares are bought at different prices over time. Another option is Sharesight, a portfolio-tracking tool that includes cost basis tracking and automatic adjustments for dividends and capital gains calculations.

While these estimators can be useful, they may not always account for individual transaction fees or tax lot selections. Therefore, it is important to verify the results against any available records.

Cost Basis Recordkeeping Tips for Investors

Depending on when you purchased stocks or other investments, your brokerage should be tracking your cost basis for you. However, it is still a good idea to maintain your own records as a backup.

Here are three tips that FINRA suggests for tracking cost basis when buying and selling stocks:

• Save the transaction confirmations your brokerage sends every time you make a trade.
• Note any stock dividends paid out to you and non-dividend distributions, since these can factor into cost basis calculations.
• If you buy multiple shares of the same stock and plan to use specific identification for cost basis calculations, note the date of purchase for the shares and their price.

Remember that you may need to use a different method to determine the cost basis for inherited or gifted stock. In this case, you may need to use the original owner’s basis or the fair market value of the stocks at the time you received them.

How Corporate Actions Affect Cost Basis

Determining what you originally paid for a stock is only the starting point. Over time, corporate actions can change the calculation of your cost basis, sometimes years after the initial purchase.

Investors who overlook these adjustments risk reporting the wrong gain or loss when they eventually sell.

Stock Splits

Stock splits are among the most common examples.

A split increases the number of shares you own while reducing the cost basis assigned to each share. The overall investment value and total cost basis stay the same, but the per-share calculation changes.

If these adjustments are not reflected in your records, your taxable gain may appear larger than it actually is.

Reverse Stock Splits

Reverse stock splits have the opposite effect.

Instead of increasing your share count like a stock split, they consolidate shares into a smaller number of higher-priced shares. While your total cost basis remains unchanged, the basis allocated to each remaining share increases.

Keeping track of these changes is especially important for stocks that have undergone multiple restructurings over the years.

Mergers and Acquisitions

Mergers and acquisitions can create additional complications.

Depending on the transaction’s structure, your original shares may be exchanged for shares of another company or converted partially into cash. It may also be replaced by a combination of both.

Each scenario can have different tax consequences and may require adjustments to your basis calculations.

Corporate Spinoffs

Corporate spinoffs often require investors to divide their original cost basis between two separate companies. After a spinoff, part of the basis remains with the parent company while the rest goes to the newly independent business.

The allocation is typically based on relative market values, which can be difficult to calculate without company-provided guidance.

Dividend Reinvestment Plans (DRIPs)

Dividend reinvestment plans (DRIPs) create another layer of complexity. Every reinvested dividend purchases additional shares, effectively increasing your total cost basis.

Investors who have reinvested distributions for many years may have dozens or even hundreds of separate purchase lots. Ignoring those additions can result in overstating gains and paying more tax than necessary.

While most brokerage firms now track cost basis for many holdings, their records are not always complete. This is particularly the case for older investments, transferred accounts and securities affected by complex corporate events.

Reviewing your records after major corporate actions can help ensure your basis is accurate before you sell and receive an unexpected tax bill.

Bottom Line

Knowing how to find the cost basis of old stock matters for tax reporting when you’re buying or selling investments. The more you’re able to minimize tax liability, the more of your investment returns you’re able to keep. You can work with your brokerage to obtain your purchase history so you can correctly file your tax return come tax time.

Tips for Investing

• Consider talking to your financial advisor about finding the cost basis of old stock if you’re unsure of which method to use. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, begin now.
• Tax-loss harvesting can help you to minimize your tax bill if you’re reporting capital gains. Harvesting losses simply means selling off stocks at a loss to offset gains in your portfolio. If you’re investing through a robo advisor, this may be done for you automatically. But you can harvest losses yourself through a taxable brokerage account.

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