The cost basis for stock sales is used to calculate capital gains when paying taxes on this gain. Referencing your investment statements or contacting your investment broker may reveal the original cost basis, but if the stock was acquired years ago, this information may be unavailable. Fortunately, the Internal Revenue Service (IRS) will allow a best effort estimate of the cost basis when calculating taxes. The original cost basis is complicated by stock splits or merges.
1. Contact your investment broker or research your stocks on financial websites, such as those provided by MSN, Yahoo or Google. Look for the highest and lowest stock prices around the time you acquired the stocks. If you inherited the stocks, use the original owner's date of death. As an example, if you purchased the stock in 1980, look for stock prices within that year and extract the highest and lowest prices. While you're looking, find the total stock splits from 1980 and the present time. Your broker, company website or financial website will list total split, such as 1-to-32.
2. Add the highest and lowest price and divide by 2 to calculate the average stock basis. As an example, if the lowest and highest prices were $40 and $60, then your average cost basis is $50.
3. Multiply the number of shares you sold by the split ratio. In the example, if you sold 128 shares and the stock split a total of 1-to-32, multiply 128 by 1/32 to calculate 4 original shares.
4. Multiply the original number of shares by the average cost basis to calculate your total cost basis. Continuing with the example, multiply 4 times $50 to calculate your cost basis of $200.