Capital gains on securities: how to calculate the cost basis

Capital gains on securities are the difference between what you receive upon sale, net of selling expenses, and what the securities cost you, including documented purchase costs. When you have purchased securities of the same type in several installments, the cost used is a weighted average price: this method is mandatory. Without proof of purchase, the securities are considered to have been acquired at zero value: the capital gain then applies to the entire selling price, net of selling expenses.

This page deals with the calculation of capital gains. It does not cover the choice between flat tax and progressive tax rates, nor the allowances for holding period, which are addressed on other pages. It also does not cover the division of ownership rights, joint ownership, stock options, or digital assets, which are subject to their own specific rules.

The formula

The net gain is the difference between the sale price and the purchase price. The BOFiP (French Official Tax Bulletin) specifies that the sale price is net of fees and taxes paid by the seller. The purchase price, on the other hand, includes acquisition costs. According to impots.gouv.fr (the French tax authority's website), a negative difference is a capital loss, which can only be offset against capital gains of the same nature; a positive difference is reduced by any offsetting capital losses.

The sale price: net of the seller's fees

The BOFiP stipulates that the sale price is reduced by the amount of fees and taxes paid by the seller on the occasion of the sale.

• Stock market issuance : the fees include trading commissions and brokerage fees, as well as commissions paid in the event of use of the deferred settlement service (SRD).
• Off-exchange sale For example, intermediary commissions and fees paid to experts responsible for evaluating securities can be deducted when these costs are borne by the seller.

The purchase price

The principle

The purchase price is the total amount of all considerations actually borne by the buyer as a result of the acquisition. In practice, this is the stock market price at which the transaction was concluded, or the actual price stipulated between the parties.

Acquisition costs

The acquisition price must be increased by acquisition costs, subject to three conditions: they must have actually been incurred, they must be related to the transferred securities, and you must be able to justify them. The BOFiP (French Official Tax Bulletin) describes these costs "as a general rule": intermediary fees, expert fees, brokerage fees, negotiation, subscription, allocation or deferred settlement service commissions, taxes paid during the acquisition of the transferred securities and, where applicable, legal fees.

The flat rate of 2 % of the acquisition price only concerns securities acquired, or deemed to have been acquired, before January 1, 1987. It does not apply to current purchases.

Madelin tax reductions«

If you received a tax reduction known as a "Madelin" tax break upon subscription, the purchase price is reduced, where applicable, by the amount of the reduction actually received. If you sell all the shares before the end of the five-year holding period, the tax reduction is fully reclaimed and the subscription price remains unchanged. If you sell only part of the shares before this period, the tax reduction is partially reclaimed, and the subscription price of the shares sold after the holding period is reduced by the portion of the tax reduction that remains unchanged. The specific details will vary depending on your individual circumstances.

No supporting document: zero value

If you cannot justify either the price or the acquisition value, the securities are deemed to have been acquired for zero value.

Multiple purchases: the weighted average price

When you have acquired securities of the same type at different prices, the acquisition price to be used is the weighted average acquisition cost of these securities. This method is mandatory for the taxpayer.

Two rules to remember:

• The weighted average price remains the same as long as you do not make any further purchases of securities of the same type. A sale does not change it.
• For identifiable securities (numbered or registered), the BOFiP (French Official Tax Bulletin) stipulates that the gain is determined for each individual security sold. If you sell all the individual securities of a company, it accepts the weighted average price.

If your securities are distributed among several intermediaries, each can calculate the average price and profit account by account, without taking into account transactions carried out elsewhere.

The calculation of the BOFiP. A taxpayer buys 100 shares at €95, 200 at €105, and 100 at €107. The weighted average price is [(100 × 95) + (200 × 105) + (100 × 107)] ÷ 400 = €103. He sells 150 shares at €110: the net gain is 150 × (110 − 103) = €1,050. He is left with 250 shares at the weighted average price of €103.

Special situations

For shares issued free of charge, the BOFiP provides an example: 1,000 shares purchased for €300,000, then 200 free shares. The cost basis of each share, old or new, is €300,000 ÷ 1,200 = €250.

Other rules: according to impots.gouv.fr, the acquisition price is reduced by the reimbursements of contributions and the issue premiums attached to the securities sold; according to the BOFiP, for a manual gift, the value retained for the rights can replace the original price if the transfer deed recognizes the gift.

Securities received by gift or inheritance

An exemption or reduction of transfer taxes has no impact on the value used for calculation. This value is increased by the costs associated with the acquisition free of charge: legally due transfer taxes and the fees of the notary who drafted the deed. In the event of death, only the costs related to the transferred securities are taken into account. The flat-rate allowance of 2 %, calculated on the value used for calculating transfer taxes, also applies to securities acquired before January 1, 1987.

Who calculates, and what to declare

In principle, your capital gains and losses are calculated by your financial institution. If you calculate them yourself, or if the institution was unable to determine them, you must complete form no. 2074.

Numerical example (fictitious profile)

Situation. Marc, 54, a manager, holds 1,000 shares of the same listed company in a single securities account, purchased in three installments: 400 shares in 2019 at €52 (including fees), 300 in 2021 at €64, and 300 in 2023 at €71. He sells 600 shares in 2026 at €80, with €96 in brokerage fees.

Issue. Which cost price should be used, given that the three purchases were made at different prices? Using the price of the last purchase seems simple, but that's not the rule.

Strategy. Calculate the weighted average price over all 1,000 shares, then the net gain after disposal costs, then the flat-rate tax.

Result.

There are 400 shares remaining at €61.30. The sale did not change this price. If Marc had used the price of the last lot (€71), he would have calculated a gain of €5,304, which is €5,820 less than the gain to be declared.

Marc is a fictional profile. The calculation assumes that the 1,000 shares are of the same type and held with a single broker, that the price of each lot includes purchase costs, as justified, that Marc has no capital losses to carry forward, and that the flat tax rate (PFU) applies without opting for the progressive tax scale, at the rates of 12.8% and 18.6% as indicated by service-public.gouv.fr and impots.gouv.fr. The inclusion of purchase costs in the price of each lot is an assumption of this example, not a rule cited by the BOFiP (French Official Tax Bulletin). This calculation does not predict your specific situation.

Investing in stocks carries a risk of capital loss.

What changes depending on your situation

• The way you acquired the securities purchase, subscription, free allocation, option, gift or inheritance.
• The supporting documents you hold : their absence reduces the acquisition price to zero.
• The number of intermediaries who hold your securities.
• The nature of the securities : identifiable securities, PEA, foreign securities, employee securities.

The rule depends on your situation. No results are guaranteed.