By Kaye A. Thomas
Current as of May 21, 2018
How to determine your basis and holding period for stock bought in a normal purchase.
This page explains how to determine your initial basis and your holding period for stock you bought in a normal purchase. The general rules here don’t apply in the following special situations:
- Stock you bought from your spouse.
- Stock you bought through a dividend reinvestment plan.
- Stock you bought when you exercised an option.
- Stock you bought in a wash sale. (A wash sale occurs when you sell stock at a loss but purchase identical stock within 30 days before or after the sale.)
If none of the special situations mentioned above apply, your initial basis for stock you buy is:
- The amount paid for the stock, plus
- Any costs of purchase, such as a brokerage commission.
Example: You buy 40 shares of XYZ at $38.50 (total purchase price $1,540) and pay a $20 commission on the purchase. Your initial basis for this stock is $1,560, or $39.00 per share.
Regular stock purchases have a trade date (when the broker executed the transaction) and a settlement date (when the shares and cash change hands). See Trade Date and Settlement Date. Your holding period is measured from the trade date. To have a long-term capital gain, you need to hold these shares until the anniversary of the day after the purchase.
Example: The trade date of your purchase is December 15, 2018. If the trade date of your sale is December 15, 2019, you will have short-term gain or loss. If the trade date for your sale is December 16, 2019 or later, your gain or loss is long-term.