Creating a plan for disposing of capital assets is simply a matter of performing some basic calculations to determine whether the asset will be sold at a gain or loss. With careful planning, you can sell stock at a loss to offset other capital gains and sources of income you acquire during the year. If you net your capital losses against capital gains, you can deduct the full amount of your loss, up to the amount of your gains. If you have additional losses beyond your capital gains amount, you may deduct up to an additional $3,000 against other sources of income and carry over excess losses to future tax years.
1. Calculate your base cost basis in the stock. Your base cost basis is the price you paid for each share when you acquired the stock.
2. Calculate additions to cost basis. This includes the cost of any commissions, broker and transaction fees you pay. Divide the total of these costs by the number of shares you own. The result is the per-share cost of additions. In the event that you don’t dispose of all your shares of stock, you must know how your investment costs are allocated to each share. Add the per-share additions to the price-per-share amount. The result is your total cost basis for one share of stock.
3. Subtract the per-share value of any additional stock you received as a result of stock splits or shares in lieu of cash dividends from your per-share cost basis. The result is your adjusted basis for the share.
4. Determine the per-share amount that you receive when you sell your stock. Subtract this amount from your adjusted basis. You have a capital loss if the result is negative.