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Related to Basis: SAP BASIS, Basis risk, Basis points


The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold. Also, for a futures contract, the difference between the cash price and the futures price observed in the market.


1. The cost of an asset less depreciation. This is used when calculating one's tax liability related to that asset.

2. The all-in cost of a security when it is bought. That is, it is the price of the security plus any applicable fees. This is the price against which any capital gains or losses are calculated for tax purposes. For example, if the tax basis for a stock is $5 per share and the investor sells it for $7, then the capital gain for which one is liable is $2 per share. It is also called the cost basis.


1. In futures trading, the difference between the futures price and the spot price. The basis will narrow as a contract moves closer to settlement.
2. In taxation, the acquisition cost of an asset adjusted for capital distributions (that is, stock dividends). A security's basis is used in calculating gains and losses for tax purposes. Also called cost basis, tax basis. See also adjusted basis.


Basis is the total cost of buying an investment or other asset, including the price, commissions, and other charges.

If you sell the asset, you subtract your basis, also known as your cost basis, from the selling price to determine your capital gain or capital loss. If you give the asset away, the recipient's basis is the same amount as yours.

But if you leave an asset to a beneficiary in your will, the person receives the asset at a step-up in basis, which means the basis of the asset is reset to its market value as of the time of your death.


A tax and accounting term referring to the original acquisition cost of a property; used to determine annual depreciation deductions and eventual gain or loss upon the disposition of the property. This concept is fundamental to almost all real estate analysis and real property tax planning,and an important one to master.Some of the key concepts are

• The basis may be increased by adding some acquisition and closing costs. Many taxpayers would prefer to write off those costs as deductible expenses, but that is not allowed.

• The basis may be increased as you make capital expenditures for the benefit of the proper- ty. Usually a capital expenditure is something that adds value above and beyond the slight increase experienced when things are repaired.

• The basis is decreased each year as you deduct depreciation expenses on your taxes.

• Property acquired by gift will have the same basis the donor had, plus any capital improve- ments made by the donee, plus any gift taxes paid by the donor.

• Property acquired by inheritance will receive a stepped-up basis valued as of the date of death or a date 6 months afterward, depending on which election is selected. While this may be good for the heir, it might be bad for the estate to value property at a high value and be required to pay estate taxes.

• Property acquired by virtue of a 1031 exchange will have the same basis as the property sold. If this doesn't make sense, refer to definition for 1031 exchange, which is too long to include here.

• The basis must be allocated between land and improvements. Land cannot be depreciated for tax purposes, but improvements can. There is no precise formula, and taxpayers are expected to use good faith in their allocation rather than setting artificially high improve- ment values in order to maximize depreciation deductions.

• Most consumers do not currently track the basis in their homes, nor the capital improve- ments such as a new roof, swimming pool, or new garage. This is because current tax code provisions allow individuals up to $250,000 in gain ($500,000 for married persons) on the sale of their personal residence without incurring any tax liability. However, the apparent large size of this number could easily be eroded by inflation, and Congress could easily change the tax laws.


The amount assigned to an asset from which gain or loss is determined for income tax purposes when the asset is sold. For assets acquired by purchase, basis is cost. Special rules govern the basis of property received by virtue of another's death or by gift, the basis of stock received on a transfer of property to a controlled corporation, the basis of the property transferred to the corporation, and the basis of property received upon the liquidation of a corporation.
References in periodicals archive ?
The issue was whether certain indirect payments from Paulan to Sidal were loans from the shareholders to Sidal, which would create basis for the taxpayers against which losses might be deducted.
Thus, it is more important than ever for taxpayers to accurately track the tax basis in their homes.
Since the first quarter of 2005, the SA delinquency rate decreased 29 basis points for subprime loans and 25 basis points for VA loans, whereas the rate increased 3 basis points for prime loans and 64 basis points for FHA loans, said MBA.
81-70 recognizes that in the event of a widely held target company the potential exists for shareholders to not respond to a tax basis inquiry.
The adjustments to basis are made to property held by the debtor at the beginning of the year after the discharge of indebtedness occurs.
15 basis points), plus incentives related to a portfolio performance in excess of some benchmark.
Under the proposed regulations, A would have a realized loss equal to the disappearing basis in the shares redeemed, but would not be able to recognize it until the earlier of the "final inclusion date" or the "accelerated loss inclusion date.
If the IRS is not satisfied with the sampling, it potentially has the authority to set the taxpayer's basis in the stock at zero.
2) section 743 (relating to optional adjustment to basis of partnership property), and
Note that section 168(k) includes regulations relating to the depreciation of the basis of the replacement property in an exchange under section 1031 for modified accelerated cost recovery system (MACRS) property.
Peracchi contributed two parcels of real estate that were encumbered by liabilities that exceeded his adjusted basis in the properties by $566,807.
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