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What is “cost basis,” and why does Wealthfront need it to convert transferred investments to my Wealthfront portfolio?

“Cost basis” is the industry term for the purchase date and price you paid for your investments. The IRS website says “the basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees.” Fees that you paid to invest, dividend reinvestments, and corporate actions can also impact your cost basis.

Wealthfront uses your cost basis to manage your tax liability when converting your transferred investments to your Wealthfront portfolio. Specifically, we look at your purchase date and purchase price to ensure that we only sell investments you’ve held for more than a year (long­term gain), or when the investment is worth less than when you bought it (which is an opportunity to harvest a loss).

Learn more about how we manage your tax ­liability during account transfers here.

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Wealthfront prepared this article for informational purposes and not as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront and its affiliates may rely on information from various sources we believe to be reliable (including clients and other third parties), but cannot guarantee its accuracy or completeness. See our Full Disclosure for more important information.

Wealthfront and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisor. Financial advisory and planning services are only provided to investors who become clients by way of a written agreement. All investing involves risk, including the possible loss of money you invest. Past performance does not guarantee future performance.