© 2014 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Cost Basis

Definition:

What'd it cost ya'? It matters because of the man who cometh (taxman, not iceman). You bought 1,000 shares of IBM at $100 and sold it 2 years later at $140 net of commissions. Great job. You made 40 grand. You get taxed on said 40 grand. But you wouldn't know it's 40 grand if you didn't know your cost basis of 100 grand. You laid out $100/share for 1000 shares. Even without the fancy calculus, that works out to a cost basis of $100,000.

Advertisement