The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. When selling securities, you should be able to identify the specific shares you are selling.

If you can identify which shares of stock you sold, your basis generally is:

• What you paid for the shares sold plus any costs of purchase.

If you can't adequately identify the shares you sold and you bought the shares at various times for different prices, the basis of the stock sold is:

• The basis of the shares you acquired first, then the basis of the stock later acquired, and so forth (first-in first-out). Except for certain mutual fund shares and certain dividend reinvestment plans, you can't use the average basis per share to figure gain or loss on the sale of stock.

Each security you buy is considered a covered security. The broker is required to provide you basis information on the Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. For each sale of a covered security for which you receive a Form 1099-B, the broker will provide you the following information: the date of acquisition (box 1b), whether the gain or loss is short-term or long-term (box 2), cost or other basis (box 1e), and the loss disallowed due to a wash sale (box 1g) or the amount of accrued market discount (box 1f).

The law requires you to keep and maintain records that identify the basis of all capital assets.