Adjusted Cost Basis

Adjusted cost basis is the total amount you invested in a position, including the purchase price and any transaction fees or commissions. It's the number the IRS uses to determine whether you made or lost money on a trade.

How it works in prediction markets

When you buy prediction market contracts, your cost basis is calculated as:

For example, if you buy 200 YES shares at $0.45 each with a $1.50 fee, your adjusted cost basis is:

Why "adjusted"?

The word "adjusted" means the basis has been modified from the raw purchase price to include fees, commissions, and any other costs of acquiring the position. In most prediction market scenarios, the adjustment is simply adding fees to the purchase price.

Multiple purchases

If you buy into the same market multiple times, your cost basis depends on which shares are being settled. Under FIFO (first in, first out) — the method used by predictiontaxes.com and the IRS default — the earliest shares you purchased are matched against settlements first.

Why it matters

Your gain or loss on any position is calculated as Proceeds − Cost Basis. Getting the cost basis wrong means reporting the wrong gain or loss to the IRS, which can trigger an audit or penalties.