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Original Basis

The basis of stock or mutual fund shares is usually the amount you paid for them. This includes commissions or fees you paid.

Received stock or mutual fund shares as a gift

If you received stock or shares of a mutual fund as a gift, the basis is usually the total of these:

  • Amount the person who gave it to you paid for it
  • Some or all of gift taxes paid, depending on when the property was bought

However, the basis might be equal to the fair market value on the day you received the gift. This applies when the value of the stock is less than the donor's basis on the date of the gift, and you sell the stock for a loss.

To learn more, see the Sale of Property chapter in Publication 17: Your Federal Income Tax at www.irs.gov.

Inherited stock or mutual fund shares

You might inherit property from someone. If so, your basis is usually the fair market value on the deceased’s date of death. This applies unless the estate’s executor chooses an alternate valuation date.

Special rules apply for individuals who died in 2010. For that year only, the executor could have chosen to use a modified carryover basis. This means your basis in the inherited property would be the deceased’s basis on the date of the deceased’s death. The executor of the estate could have increased the basis in the inherited property. They would do this by using a $1.3 million discretionary basis step-up. Check with the executor of the estate to figure the basis in property inherited in 2010.

To learn more, see the “Sale of Property” chapter in Publication 17: Your Federal Income Tax at www.irs.gov.

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