--- title: "Cost basis: Definition and Sources | Tax Glossary" description: "Cost basis is generally the amount you paid for an asset, and it is used to figure depreciation and any gain or loss when you sell." url: https://wallacecpa.multisites.ai/glossary/cost-basis publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- Federal tax # Cost basis Cost basis is generally the amount you paid for an asset, and it is used to figure depreciation and any gain or loss when you sell. Basis is generally what you paid for an asset. It includes sales tax and other costs tied to the purchase. For stocks and bonds, it is the purchase price plus added costs such as commissions. Basis is the starting point for [depreciation](https://wallacecpa.multisites.ai/glossary/depreciation) and for figuring a [capital gain](https://wallacecpa.multisites.ai/glossary/capital-gains) or loss on a sale. Gifts and inheritances follow other rules, so the IRS points to Publication 551. A wrong basis is a common reason for an [IRS CP2000 notice](https://wallacecpa.multisites.ai/glossary/irs-cp2000-notice), because a broker may report no basis at all. Keep purchase records for as long as you own the asset, and several years after. The [record retention guide](https://wallacecpa.multisites.ai/guides/how-long-to-keep-tax-records) gives details. [Wallace CPA can helpTax preparation](https://wallacecpa.multisites.ai/services/tax-preparation) ## Related terms - [Capital gains](https://wallacecpa.multisites.ai/glossary/capital-gains) - [Depreciation](https://wallacecpa.multisites.ai/glossary/depreciation) - [IRS CP2000 notice](https://wallacecpa.multisites.ai/glossary/irs-cp2000-notice) - [Section 179 deduction](https://wallacecpa.multisites.ai/glossary/section-179-deduction) ## Sources 1. [IRS: Topic no. 703, Basis of assets](https://www.irs.gov/taxtopics/tc703) ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092