Average Cost Pricing Rule

Finance allah shmoop What is tax basis Well your basis

is your cost Your costs for assessing how much you

owe when the tax man coming you bought a thousand

shares of whatever dot com at twelve bucks a share

in its eye po and huzzah Three years later the

stock is at thirty You decide whatever dot com is

now passe because a kardashians said so it'll be over

taken by whenever dot com and you want to sell

So you dio and you live in a thirty percent

marginal tax blue state And that is your federal tax

rates in twenty percent But then you add in ten

percent for state taxes and whatever's left for obamacare and

you pay about thirty percent tax on your gains Well

you paid twelve grand to buy the stock and after

the sale you took in thirty grand when you sold

it for a gain of eighteen thousand dollars Your tax

basis on those shares is twelve grand so you pay

thirty percent tax on the eighteen grand of gain or

fifty four hundred dollars to net from the sale of

thirty thousand dollars worth of stock How much Yeah twenty

Four thousand six hundred dollars He fancy math Had you

just gotten those shares free I'ii they were gifted to

you and you had no tax basis or a tax

basis of zero dollars a share Well then your gain

would have been from zero to thirty grand or a

gain of thirty thousand dollars to then be taxed at

thirty percent or nine grand in taxes to net just

twenty one thousand dollars after the sale So having ah

high tax basis or at least being able teo point

toe one saves you money when the tax man coming

and well that's pretty much it alright he's gone Now

you can all come out Come on it's Okay it's 00:01:53.698 --> [endTime] safe