26 U.S.C. § 1012 — Basis of property—cost

(a) In general. Property’s basis is its cost, unless this subchapter or subchapters C, K, or P provides otherwise.

(b) Apportioned real-estate taxes. The cost of real property^* does not include real-estate taxes treated under section 164(d) as imposed on the taxpayer^*.

(c) Account-by-account determinations. (1) For selling, exchanging, or otherwise disposing of a specified security on or after the applicable date, the rules in regulations under this section apply separately to each account. (2)(A) Unless (B) applies, stock^* eligible for an average-basis method and acquired before January 1, 2012, is a separate account from eligible stock acquired on or after that date. (B) A regulated investment company may elect to treat one or more stockholders’ stock as one account. Then (i) (A) does not apply to that stock, and (ii) all of that stock is treated as covered securities under section 6045(g)(3), regardless of acquisition date. A similar rule applies to a broker holding the stock as nominee. (3) “Specified security” and “applicable date” have the meanings given in section 6045(g); this section does not define them.

(d) Average basis for dividend-reinvestment-plan stock. (1) For stock acquired after December 31, 2011, through a dividend reinvestment plan, its basis while held in the plan is determined by a method allowed for regulated-investment-company stock. (2) When such stock is transferred to another account, its cost basis there equals its plan basis immediately before transfer, properly adjusted for transfer fees or charges. (3) Rules similar to subsection (c)(2) apply. Despite paragraph (1), an election under similar rules permits the average-basis method for all such stock regardless of acquisition date. (4) “Dividend reinvestment plan” means an arrangement in which dividends on stock are reinvested in identical stock. Stock is treated as acquired through the plan if acquired under it or if dividends on it are subject to it.