Understanding how to calculate gain/loss of a stock can be a little confusing especially if you use dollar cost averaging or other methods to invest.
Follow these quick tips to make sure you properly calculate gain/loss of a stock.
- Stay organized and keep good records! Your friends at IRS expect you to substantiate all profit or losses with evidence.
- Understand the cost basis. The cost basis is the purchase price + fees and commissions on the purchase and sale of the security.
- If the Sales of the security is greater than the cost basis (see above) then you have a profit. If the security sells for less than the cost basis then you have a loss.