Q:

How do you perform free cost basis calculations online?

A:

Quick Answer

Cost basis calculations vary for each individual and type of asset, but TurboTax offers software to assist with calculation and provide the most favorable refund options, notes the company's website. In addition, certain regulations require brokerages to maintain databases and cost basis information to assist taxpayers.

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Full Answer

Basis represents an investment in an asset and assists with a profit or loss calculation, notes the TurboTax website. An investment can simply be the purchase price, but there are circumstances that dictate advanced basis calculations. Gifts require a basis calculation that is dependent upon the gain or loss amount at the time of sale. Inheritance also requires considerations of the asset's market value at the time of the original owner's death. Assets can appreciate or depreciate over time, thus changing their value when inherited.

Divorce and tax filing statuses also impact basis. Some common assets that have basis considerations during divorce include a family home or stock portfolio. Stock splits, dividend reinvestment and mutual funds also have unique basis considerations, reports the TurboTax website. Adjusted basis calculations also apply to undistributed capital gains and return of capital distributions. Undistributed capital gains result in a basis increase, whereas returns of capital yield a decrease in basis. In most instances, a basis amount cannot fall below zero.

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