Do You Know The Basis In Your Property?

Basis is the term used for the amount of your investment in a property. For tax purposes, use your basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale or exchange of the property.


Basis of Property
The basis of property you buy is usually its cost. The cost is the amount you pay for it in cash, borrowed money, and other property or services. Cost includes sales tax and other expenses connected with the purchase.


Basis of Securities
If you buy securities (stocks or bonds) your basis is the purchase price plus any additional costs such as commissions and recording or transfer fees. If you have securities that you did not purchase, the method for determining your basis depends on how you acquired the securities. For example, if you inherited the securities your basis is usually their fair market value on the date the decedent died.


Adjusted Basis
Before figuring gain or loss on a sale, exchange, or other disposition of property, or figuring allowable depreciation, you must usually determine the adjusted basis of that property. Certain events that occur during your period of ownership may increase or decrease your basis. Increase your basis by items such as the cost of improvements that add to the value of the property and certain acquisition fees, and decrease it by items such as depreciation and insurance reimbursements for casualty and theft losses.

Additional resources:

Capital Gains and Losses
Interest Income
Dividends
Form 1099