Basis

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

Basis

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.

Basis

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.

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.

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.

basis

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.

Basis

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 ?
Thus, the function of basis can be summarized as follows:
Basis measures the amount that the property's owner is treated as having invested in the property.
The NDS found that the rate of loans that were seriously delinquent rose by 327 basis points for prime loans and was up 745 basis points for subprime loans in the period from fourth-quarter 2008 to fourth-quarter 2009.
BASIS ADJUSTMENT TO STOCK OF S CORPORATION DONATING PROPERTY
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.
You must not expressly agree in an Interim Agreement that the basis of authority for the Palestinian police force is Israel's alleged authority to maintain law and order as a belligerent occupant.
* The excess of depletion deductions over the basis of the property in question (non-oil and gas property only).
Various elections are available which allow the taxpayer to plan the order in which the loss carryovers and basis are reduced and, in the case of reduction in basis, the properties affected.
The foreclosure inventory rate increased 5 basis points for prime loans in the second quarter to 0.59 percent, and was up 42 basis points for subprime loans to 5.52 percent.
Because Bill has contributed real property with a FMV in excess of basis, he recognizes gain on the transfer to the corporation if the transaction does not qualify as a Sec.
* Home improvements-such as construction of an addition or installation of a pool-give rise to basis increases.
* The determination of target stock tax basis in many, if not most, stock swaps is based on information received (or accessible) from the previous stock owners of the acquired company; the longer a company has to wait to retrieve and analyze the information, the more difficult it may be.

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