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2. The difference between the present price of a commodity and the futures price. See also: Spread.
The cost basis is the original price of an asset -- usually the purchase price plus commissions. You use the cost basis to calculate capital gains and capital losses, depreciation, and return on investment.
If you inherit assets, such as stocks or real estate, your cost basis is the asset's value on the date the person who left it to you died (or the date on which his or her estate was valued). This new valuation is known as a step-up in basis.
For example, if you buy a stock at $20 a share and sell it for $50 a share, your cost basis is $20. If you sell, you owe capital gains tax on the $30-a-share profit.
If you inherit stock that was bought at $20 a share but valued at $50 a share when that person died, your cost basis would be $50 a share, and you'd owe no tax if you sold it at that price.
The original cost of a property. After increases for capital improvements made over the years,and decreases for depreciation deductions or involuntary conversions such as condemnation, the number becomes one's adjusted basis.