Cost basis is the original value of an investment for tax purposes, including the purchase price plus commissions and fees. It determines the capital gain or loss when you sell.
Cost Basis = Purchase Price + Commissions + Adjustments (splits, DRIP, wash sales)
You buy 100 shares at $50 with a $10 commission. Your cost basis is $5,010 ($50 × 100 + $10). If a 2:1 stock split occurs, your basis per share becomes $25.05.
Stock splits change your cost basis per share but not your total basis. After a 4:1 split, your 100 shares at $400 ($40,000 total) become 400 shares at $100 each — same $40,000 basis, but $100/share not $400/share.
DRIP reinvestments create new tax lots at different prices. Each quarterly dividend reinvestment is a separate purchase with its own cost basis and holding period. Selling "all shares" may include dozens of lots with different tax treatments.
Corporate actions (mergers, spinoffs) require cost basis allocation that brokers sometimes get wrong. Always verify your broker's cost basis after any corporate action — a misallocated spinoff basis can create phantom gains of thousands of dollars.
AllInvestView tracks cost basis across multiple lots with FIFO, LIFO, and average cost. Read our FIFO vs LIFO guide.