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Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When a property is sold, the taxpayer pays/(saves) taxes on a capital gain /(loss) that equals the amount realized on the sale minus the sold property's basis.
If a business uses a 20-year-old property which it owns, depreciation on a historical cost basis might be insignificant. However, the management accounts could show a notional rent payable, being perhaps opportunity cost - the amount the business could receive if it let the property to a third party.
Section 1031 exchange—If a business sells property but uses the proceeds to buy similar property, it may be treated as a "like kind" exchange. Tax is not due based on the sale; instead, the cost basis of the original property is applied to the new property. [59] [60]
The different methods used to calculate cost basis include: First In, First Out (FIFO) : The oldest shares you purchased are sold first. It’s the default method used by many brokerages if you ...
If you think average home prices are high now, wait until you see what they were the year you were born, or when your parents made their first purchase.
Tax basis of property received by a U.S. person by gift is the donor's tax basis of the property. If the fair market value of the property exceeded this tax basis and the donor paid gift tax, the tax basis is increased by the gift tax. This adjustment applies only if the recipient sells the property at a gain. [8]
Case history; Prior: 3 T.C. 585 (1944); reversed, 153 F.2d 504 (2d Cir. 1945); cert. granted, 328 U.S. 826 (1946).: Holding; The amount of a nonrecourse mortgage securing property is included in the basis of that property and — upon disposition of the property — the entire remaining balance of the mortgage must be included in the taxpayer's amounts realized.
Cost Basis Explained. In general terms, cost basis is the original price you paid to purchase something. In this case, it’s the purchase price of an asset like a stock and it’s adjusted for ...