- Cost basis is part of the tax record for an investment, not the same thing as its current market value.
- Different purchase lots can have different basis and holding periods even when they are the same security.
- Transfers, reinvested distributions, corporate actions, gifts, inheritance, and other events can affect records or require additional documentation.
- Preserve confirmations and statements so the tax history does not depend on reconstructing old transactions later.
Tax rules and reporting requirements change. Verify current IRS guidance and the investor's broker’s records before making a tax-sensitive sale or filing a return.
Identify each lot separately
When the same security was bought at different times or prices, treat the purchases as separate lots. Record acquisition date, quantity, purchase price, adjustments, and account.
Reconcile broker records with independent account documents
Broker reporting can be helpful, but the investor remains responsible for accurate tax reporting. Check transfers and older holdings carefully, especially when records moved between institutions.
Understand why lot selection matters
When shares are sold, the identified lot can affect the reported gain or loss and holding period. Use the broker’s current procedures if the investor intends to identify specific shares.
Preserve adjustments and unusual events
Reinvested distributions, stock splits, return of capital, gifts, inheritance, and certain corporate actions can change or complicate basis. Keep supporting records and verify the current rule for the specific event.