The short and simple answer is yes. When you purchase stock or any type of security, you are doing so with the money you have earned after taxes. This type of investment creates a basis in the new asset you have acquired. However, assets such as stock tend to fluctuate in value. Therefore when you finally sell this asset, any amount you earn in excess of your basis is taxable as a capital gain. Don’t worry too much as these capital gains can be offset by any stock you may have sold for a loss that same year. The main thing is that it is important to report these sales on your tax return even if you net a loss. The proceeds you receive from the sale of these assets are reported to the IRS, and it is up to you to tell them how much you initially paid for these assets. Without this information, the IRS will assume that your basis in these assets is zero and attempt to tax you on the entire amount of the proceeds you received.