Business Glossary

the point from which gains, losses, and depreciation deductions are computed. Generally the cost or purchase price of an asset.

Example: Collins purchases land for $100,000 and erects a store for $800,000. Her tax basis is $900,000. If she then sells the property for $950,000, she has a $50,000 gain. If she instead depreciates the property, the $800,000 cost basis of improvements is depreciable; the $100,000 basis of the land remains because land is not depreciable.