§1012 Basis of property—cost

Summary

Property is normally given a tax "basis" equal to what you paid for it, unless other rules in the tax code say otherwise. For real estate, the basis does not include any real estate taxes that are taken as the taxpayer’s own under section 164(d). For certain securities sold on or after the "applicable date," the accounting rules must be applied separately for each account. Stock that can use the average-basis method and was bought before January 1, 2012 is treated as a different account from stock bought on or after that date, unless a regulated investment company chooses to let its shareholders treat all of that company’s shares as covered securities regardless of when they were bought. Stock bought after December 31, 2011 through a dividend reinvestment plan uses the same kinds of basis methods used for regulated investment company stock while it stays in the plan. If that stock is moved to another account, its basis moves with it (adjusted for any fees). Similar account and election rules that apply earlier in the section also apply to dividend reinvestment plan stock. "Specified security" and "applicable date" are defined in section 6045(g). A "dividend reinvestment plan" is any setup where dividends are used to buy the same stock, and stock is treated as acquired in connection with the plan if it was bought under the plan or its dividends are subject to the plan.