§1012 Basis of Property—cost

Summary

You must use what you paid for property as its tax basis unless other parts of the tax code (like rules for corporate distributions, partnerships, or capital gains and losses) say otherwise. When figuring the cost of real estate, do not include property taxes that are treated as imposed on you under section 164(d). For certain securities sold after an applicable date, the rules for figuring basis apply separately for each account. If an average-cost method is allowed, shares bought before January 1, 2012 are treated in a different account from shares bought on or after that date, unless a regulated investment company (a type of mutual fund) chooses to treat a shareholder’s shares together as covered securities regardless of purchase date. Shares acquired after December 31, 2011 through a dividend reinvestment plan use the same types of basis methods that apply to mutual fund shares. If those shares are moved to another account, their cost basis is the same as it was in the reinvestment plan, adjusted for any transfer fees. Similar account-date rules and an election allowing average basis for all reinvested shares may apply. "Specified security" and "applicable date" are defined in section 6045(g). A "dividend reinvestment plan" is an arrangement that reinvests dividends in the same stock.