Definition of Tax basis:
Value of an asset, used for computing gain or loss when the asset is sold. It usually equals the assets purchase price less accumulated depreciation. For example, tax basis of an asset purchased for $100,000 with to date depreciation of $30,000 is $70,000. If the asset is sold for $150,000, the capital gains tax will be computed on $80,000.
How to use Tax basis in a sentence?
- You should try to make sure that you understand how the tax basis works and that you are always doing it properly.
- I owed a large amount of tax the year that I sold my investment property because the tax basis had been greatly reduced by all the depreciation I had taken while I had owned it, but I cant complain because the depreciation was deductible.
- Someone who inherits an appreciated asset may be able to use a stepped-up tax basis as their tax basis for the asset rather than the tax basis of the decedent.
Meaning of Tax basis & Tax basis Definition