Remember, average cost sells the oldest shares first. The difference between net proceeds of the sale and the cost basis in this example indicates a gain of $107.10. To calculate the average cost, divide the total purchase amount ($2,750) by the number of shares purchased (56.61) to figure the average cost per share = $48.58.Ĭost Basis = Average cost per share ($48.58) x # of shares sold (5) = $242.90. DateĪverage Cost per share = Total purchases ($2,750) ÷ total number of shares owned (56.61) = $48.58. The same shareholder sold five shares the following year on May 1 at $70 per share for a total sale of $350. The result is an addition to the cost basis of $50. Then the fund paid a taxable capital gain distribution of $50, which was reinvested into the fund. Example: Average cost basis calculationĪ shareholder opens an account with a $2,500 initial purchase and invests $100 into the same fund at different times during the same year. If it’s less than what you paid for it, it may be a loss. If your net proceeds are greater than the average cost basis, then the sale is generally considered a gain. When you sell a share, the net proceeds from the sale are compared to your average cost basis. The amount of research and development assets acquired in a transaction other than a business combination or an acquisition by a not-for-profit entity and written off in the period and the line item in the income statement in which the amounts written off are aggregated. Unless you elect an alternative, the average cost method is used help calculate the money you made (or lost) and how much you owe in taxes. Your average cost basis can help you calculate whether or not your investment gained or lost value.Īverage cost isn’t the only method to calculate cost basis. From that figure, it calculates the average purchase price of your shares. The average cost basis method considers the total cost of your investment, factoring in purchases, reinvested dividends, capital gains and returns of capital.
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