§1012 Basis of Property—cost

Summary

Your basis in property, the starting number used to figure your gain or loss when you sell, is generally what the property cost you, unless another rule in the tax code says otherwise. For real estate, your cost does not include property taxes that the tax rules treat as imposed on you under section 164(d). Special rules apply to stock and other securities. When you sell, the basis-tracking methods set by regulations apply account by account. Stock eligible for the average basis method that you bought before January 1, 2012 is treated as a separate account from stock bought later, though a mutual fund can elect to treat all of a shareholder's stock the same way. Stock bought after December 31, 2011 through a dividend reinvestment plan, where dividends are automatically used to buy more of the same stock, can use any basis method allowed for mutual fund shares, and the basis carries over if the stock is moved to another account.