§1012 Basis of Property—cost

Summary

Most property’s tax basis is simply what you paid for it. There are some special rules in other parts of the tax code that change that. For real estate, you cannot include any portion of property taxes in the cost if those taxes are treated under section 164(d) as taxes imposed on you. For certain securities, the rules about which shares you sell must be applied separately for each account when the security is sold on or after the “applicable date.” Stocks that could use an average basis method and were bought before January 1, 2012, are treated as a different account from stock bought on or after that date. A regulated investment company can choose to treat all its stock for certain shareholders as one account instead, and brokers holding that stock as a nominee follow the same rule. The terms “specified security” and “applicable date” are defined in section 6045(g). If you get stock through a dividend reinvestment plan after December 31, 2011, the cost of those shares while they stay in the plan is figured using the same kinds of methods allowed for regulated investment company stock (including average basis if allowed). If you move those shares to another account, their cost in the new account is the same as it was in the plan, adjusted for any transfer fees. The same separate-account and election rules from above apply to reinvested dividends. A dividend reinvestment plan is any setup where dividends buy the same kind of stock, and shares count as part of the plan if they were bought by the plan or if their dividends are put into the plan.