Stock Market Value vs. Cost Basis: What a Sale Actually Realizes

A higher quote is not a realized gain

A stock position can rise in market value without creating a taxable capital gain from a sale. For ordinary purchased shares held as an investment in a U.S. taxable brokerage account, separate the current valuation from the gain or loss calculated when shares are sold. The IRS calculates sale gain or loss by subtracting adjusted basis from the amount realized, not by measuring today's price change.[3]

Here, market value means shares held multiplied by a stated reference price. It is a valuation snapshot, not guaranteed sale proceeds. Unrealized gain or loss compares that value with the remaining shares' adjusted basis; realized gain or loss uses an actual disposal. The examples below assume no special tax adjustments and no other transactions.

Basis follows acquisition records, not quotations

For purchased stock, initial basis generally includes the purchase price plus acquisition costs, such as commissions. Adjusted basis means that basis after required increases or decreases; it is not a daily reset to market value.[1][3] In these examples, no later basis adjustments apply, so initial and adjusted basis are identical.

A purchase lot records a particular acquisition: its date, share quantity, price and allocated acquisition costs. Keep lots separate even when the ticker is identical. The IRS ties the basis of adequately identified shares to those particular shares; FINRA recommends retaining confirmations showing what you paid for specific shares.[3][2]

Build two lots before measuring the position

Assume these purchases of one fictional company, with all amounts in U.S. dollars. Dates, prices and fees are teaching assumptions, not market data or a broker's fee schedule.

Total basis is $10,020 for 200 shares. At a hypothetical $55 reference price, market value is $11,000 and unrealized gain is $980, before hypothetical selling costs. If the prior reference price was $54, the day's increase is only $200. Neither $200 nor $980 is automatically a realized taxable gain.

The position-wide arithmetic average is $50.10 per share, but that does not authorize using average basis for a partial sale of these ordinary purchased shares. The IRS generally disallows average basis for stock outside specified exceptions, which are excluded here.[1]

Calculate net proceeds before subtracting basis

Now assume an actual sale of 80 shares at $55 on September 21, 2026, with an $8 selling commission. Gross proceeds are $4,400; net proceeds are $4,392. The IRS's amount-realized definition subtracts expenses related to the sale, including sales commissions.[3]

Realized gain or loss = net sale proceeds − adjusted basis of the shares sold.[3] Purchase commissions are already included in our lot basis. The selling commission reduces proceeds once. Do not subtract it again if a broker's proceeds figure already reflects it. The missing input is which 80 shares were sold.

FIFO and specific identification change the result

If the shares sold cannot be adequately identified, the IRS generally requires first-in, first-out: use the earliest acquired shares first.[1] Under that rule, this sale uses 80 shares from lot A. Their basis is 80 × $40.10 = $3,208, producing a $1,184 realized gain: $4,392 − $3,208.

If instead 80 shares from lot B are validly specifically identified, basis is 80 × $60.10 = $4,808. The same sale produces a $416 realized loss: $4,392 − $4,808. Execution price and cash received are unchanged; the allocated historical basis differs. Neither outcome alone tells you the final tax bill.

Specific identification needs broker-facing evidence

For stock held by a broker, IRS Publication 550 says to tell the broker which particular stock is to be sold at the time of the sale, and receive written confirmation within a reasonable time.[3] Use the broker's supported lot-selection process, identify the acquisition lot and quantity, and retain its confirmation. Check the broker's operational deadlines before submitting the order.

A private spreadsheet preference is not the same as a properly communicated and confirmed identification. Do not assume you can choose a favorable lot when preparing the return after the transaction. If identification is inadequate, apply the IRS's FIFO rule rather than retroactively relabeling the sale.[1][3]

Reconcile what remains, not just what was sold

At the unchanged $55 reference price, the 120 remaining shares have a $6,600 market value. Under FIFO, remaining basis is $6,812 and unrealized loss is $212. Under the valid lot-B sale, remaining basis is $5,212 and unrealized gain is $1,388.

Both paths reconcile: $1,184 − $212 = $972, and −$416 + $1,388 = $972. That equals the earlier $980 unrealized gain less the $8 selling commission. Lot selection reallocates basis between sold and retained shares; it does not manufacture additional investment profit.

Treat the calculation as a starting point

Compare confirmations, lot records and the broker's Form 1099-B; FINRA emphasizes checking reported basis against your records.[2] A realized loss is not automatically deductible: wash-sale rules can disallow the deduction.[3] This is a warning, not a wash-sale tutorial.

This guide excludes retirement accounts, mark-to-market regimes, short sales, derivatives, gifts, inheritances, stock splits and fund distributions. It addresses ordinary purchased-stock lots only, not a complete account tax calculation. It provides no personal tax advice or tax-rate table. Sources were checked September 21, 2026; Publication 550 is the 2025-return edition.