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If I bought 100 shares at $100 then 2 weeks later bought an additional 100 stocks at a $150, does the cost basis for my original stocks stay the same price of $100?

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    Yes your cost basis for the original 100 shares stays at $100, and the cost basis for the additional 100 shares is $150, the only correct answer is by Craig W. – Victor Dec 1 '17 at 4:34
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    @Victor That is incorrect. There are several different permissible ways to compute cost basis and the one you are talking about, specific identification (where the cost basis for each item is what you paid for that particular item even if you have identical items you paid different prices for), is not even the most popular. And there's a good reason for that -- if you keep all these shares in the same brokerage account, what does it even mean to ask whether you sold one of the shares you bought for $100 or one of the shares you bought for $150? You have to treat them all the same. – David Schwartz Dec 1 '17 at 12:11
  • It's not even clear to me if OP is actually asking about cost basis as opposed to the "value" of their shares. Cost basis was added in an edit by somebody else. – Craig W Dec 1 '17 at 14:56
  • @DavidSchwartz - the cost basis relates to the amount you paid for the shares in relation to any tax payable on them. This is the main use of the term cost basis. To work out your overall returns on a portfolio you can use what ever method you want, but when it comes to working out any tax payable you use the cost basis method I stated. – Victor Dec 3 '17 at 3:45
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you might be confusing yourself. its the most basic math. if you buy an orange at $1 and buy another orange at $3, do you own 2 oranges at $1 each? the answer is obvious.

you'll just have 100 shares at $100 and 100 shares at $150. thats an average of $125/share.

calculate it like this: (how much you just bought * price /total amount owned) do this for all your purchases to find the weighted average.

for example: if i bought 68 shares at $3 then 892 shares at $3.5 then 100 shares at $4... i have a total of 1060 shares. calculation of the average price of these shares: (68/1060*$3) + (892/1060*$3.5) + (100/1060*$4) = $3.515/share

  • A more straightforward way to show your example calculation would be thus: Purchase 1) 68 shares at $3 = $204 total; Purchase 2) 892 shares at $3.5 = $3122 total; Purchase 3) 100 shares at $4 = $400 total; Total cost = 204 + 3122 + 400 = $3726; Average cost per share is 3726/1060 = $3.51509/share – Derek_6424246 Nov 30 '17 at 20:50
  • You're right. Should be done that way – sculpter Dec 1 '17 at 2:10
  • This answer is incorrect, the OP asked what the cost basis is for the original 100 shares - that would be $100 plus any brokerage. – Victor Dec 1 '17 at 4:34
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All 200 shares are worth whatever you can find somebody willing to buy them for. If you're talking about a highly liquid stock with plenty of buyers and sellers, that's usually somewhere close to the last traded price that you will see widely reported on financial websites. If you just purchased 100 shares at $150, immediately afterwards you would likely be able to sell all 200 for near that price if you so choose.

There is a separate concept called cost basis, which is what you paid for those shares. That remains $100 for the first 100 shares as $150 for the second 100 shares, regardless of what happens to the market share price.

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If you are determining the cost basis of your stocks on sale, the answer might differ based on which shares are sold. In total, your total cost basis is the average cost of all your holdings, and your total gain is the average gain of all holdings that you sold.

If you take your example and then sell 100 shares at $125, whether you record a capital gain, loss, or neither depends on which tax lot you use. Most brokers now let you explicitly set whether you sell First in First Out, Last in First Out, or Average, or others. Example: TD Ameritrade tax lot options

First in First Out would have use your shares bought at 100 -> 125. Gain is +25 * 100
Last in First Out Would use the shares bought at 150 -> 125. Loss of -25 * 100
Average would use the average cost of all of your holdings. 125-125 -> 0 gain

  • This answer is incorrect, the cost basis for the original 100 shares is $100, and that is the only answer. – Victor Dec 1 '17 at 4:37
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    @Victor That is not true. There are multiple methods that you can lawfully use to compute your cost basis. The method you are claiming is the only right one, specific identification, is not even the most popular method. – David Schwartz Dec 1 '17 at 12:09
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    @Victor And this can't possibly be right in general because once purchased, all the shares are identical entries in your broker's ledger. There is no way to point to one share and say, "Oh, that's one of the original 100, so I bought that one for $100." The shares, at this point, are literally indistinguishable and if you tried to tell the IRS that you know how much you paid for the particular share you sold they would not accept it. – David Schwartz Dec 1 '17 at 12:14
  • Note average method is only allowed for mutual funds and DRIPs; Q doesn't appear to be the first and definitely isn't the second. @DavidSchwartz: they are not indistiguishable; every broker I have used for decades has tracked basis per lot, and since the introduction of 1099-B basis reporting in 2011 they are required to do so. My current one even shows it realtime on the website: a holding consisting of more than one lot has a little '+' I can click to show the lots separately. – dave_thompson_085 Dec 3 '17 at 8:51
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Yes. And if a month later the price drops to $140 and you buy 200 shares, the average will be $132.50/share

This is how you and the IRS determine how much capital gain you've had, and how long you've owned stock.

  • (Note: "IRS" presumes the OP is in the U.S. Not necessarily the case.) – Chris W. Rea Nov 30 '17 at 20:43
  • Why the down-vote? – RonJohn Dec 1 '17 at 5:17
  • @ChrisW.Rea would it really be that different in every other tax office? – RonJohn Dec 1 '17 at 5:18
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    @RonJohn - yes, in Australia each parcel of shares you buy will have a different purchase date and a different cost basis so are treated differently. That way you can also determine which ones have been held for more than 12 months and get a 50% CGT discount. – Victor Dec 1 '17 at 8:54
  • @RonJohn Likely the downvote is because using average cost is just one method of computing cost basis and it is not the most popular. – David Schwartz Dec 1 '17 at 12:08

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