Cost Basis: Purchases

What this video covers

• How cost basis is built: purchase price plus commissions and fees paid to acquire the security
• How net proceeds are calculated on the sale side: sale price minus commissions and fees paid to sell
• Why commissions help the taxpayer on both ends, raising basis and lowering proceeds to shrink the taxable gain
• The classic exam trap of only adjusting commissions on one side of the trade, and how to spot the decoy answer choices
• How to compute the actual capital gain as net proceeds minus cost basis, using a worked 100-share example
• How multiple tax lots at different purchase prices are handled with first in, first out (FIFO), last in, first out (LIFO), and specific identification
• Why FIFO is the default identification method when the customer does not designate which shares to sell