Get your taxes done using TurboTax

Cost basis is the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions.  You do not have to use zero as the cost basis and can calculate the cost basis by using your records or any historical records that show the cost of asset when you purchased it and any events that affected the basis of the stock.  

 

You are taxed on the difference between the proceeds and your cost basis. When you use zero as the cost basis, you are paying taxes on the entire amount of the proceeds.