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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 ?
Miller: In Miller, (55) the Tax Court held that a taxpayer had sufficient basis in his loans to his S corporation, such that he was allowed to deduct his share of S losses.
Deductible casualty losses; payments received for granting an easement: and residential energy and first-time homebuyer credits may result in taxpayers' reducing the tax basis in their homes.
For example, assume company T has 5 stockholders, with 10 shares each and a tax basis of $10 per share--for a total tax basis of $500.
the debtor's loss carryovers and/or tax basis of his assets) must be reduced by $1.
For example, take a manager whose basic fee is 50 basis points.
All of the eligible BASIS schools outscored such other high scoring countries and educational systems as Shanghai-China, Singapore, Korea, Finland and Switzerland.
However, what happens to the basis of the shares actually redeemed by the corporation for the property received?
There are two tax rules that could apply Under section 1367, S corporation shareholders can deduct losses up to the amount of their stock basis (with a corresponding reduction in basis).
The acquiring corporation may elect from two methods how it determines its total tax basis in the stock received.
It is the first year that BASIS Chandler and BASIS Oro Valley have been eligible for The Washington Post rankings, which are released annually in April.
P owns marketable securities with a $100,000 basis and a $1 million fair market value (FMV).
First, CPAs must determine whether a cost segregation study will be beneficial for a replacement property acquired in a section 1031 exchange with the carryover tax basis.