cost basis

A stockholder’s basis equals the cost paid for the stock, subject to certain required adjustments. When a holder purchases the same stock on different dates and typically at different prices, the shares or instruments purchased on particular dates are referred to as separate lots. U.S. tax law requires that taxpayers must separately account for each lot purchased. So, holders must keep track of each lot they buy. The tax law further provides that, for purposes of computing gain or loss, if a holder does not specifically identify which lot of stock is sold, the applicable lot is determined under a first-in, first-out or FIFO method.