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How to define cost basis
Learn the definition of cost basis.
Cost basis is the original value of an asset, such as stocks, bond, mutual funds. You begin with the original purchase price, and then you adjust it for commissions, stock splits, dividends, return of capital or any other transaction that affects the original value of the asset.
Once you know the cost basis, you can compare it to the amount for which you sold the asset in order to calculate capital gains or losses. You need to know capital gains for tax purposes.