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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.
The reduction in basis occurs whether or not the business claims the depreciation. If the business then sells the asset for a gain (that is, for more than its adjusted cost basis), this part of the gain is called depreciation recapture. When selling certain real estate, it may be treated as capital gain.
The starting point for determining when a depreciation recapture will occur is to determine the basis of the asset. There are three different types of basis: original, adjusted, and recomputed basis. The original basis of an asset is usually the value of a taxpayer's investment in the asset. (See IRC § 1012). When a taxpayer purchases an asset ...
For stocks or bonds, the cost basis is To figure out whether you need to report a gain -- or can claim a loss -- after you sell, you must start with the cost basis for that investment. Your Taxes ...
By law, all brokerages are required to send most of your cost basis information to the IRS. The sale of stocks, mutual funds and most exchange-traded funds (ETFs) will generate a Form 1099-B from ...
Depreciation: The depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset's useful life. That is, the mark-down in value of the asset should be recognised as an expense in the income statement every accounting period throughout the asset's useful life. [ 1 ]
The tax basis of an asset subject to cost recovery must be reduced by deductions allowed for such cost recovery. [5] For example, if Joe claimed $25,000 of depreciation deductions on his building, his adjusted basis would be the $90,000 as above less $25,000, or $65,000.
Buying a FSBO house requires knowledge of the homebuying process and attention to detail. One thing to be aware of: A home for sale by its owner may be listed for a lower price than agent ...