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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.
Example of cost basis. Let’s say you buy 50 shares of Company A for $20 per share. The total cost of this purchase is $1,000 (50 shares x $20). ... Closing costs. Major home improvements. Costs ...
Under the stepped-up basis rule, [8] for an individual who inherits a capital asset, the cost basis is "stepped up" to its fair market value of the property at the time of the inheritance. When eventually sold, the capital gain or loss is only the difference in value from this stepped-up basis.
Sale price ($500,000) - Stepped-up original cost basis ($500,000) = $0.00 taxable capital gains On the other hand say that you hold the house for a year, during which time the price of this house ...
A stepped-up basis can be higher than the before-death cost basis, which is the benefactor's purchase price for the asset, adjusted for improvements or losses. Because taxable capital-gain income is the selling price minus the basis, a high stepped-up basis can greatly reduce the beneficiary's taxable capital-gain income if the beneficiary ...
The IRS allows married couples to exclude up to $500,000 in home sale profits from capital gains taxes. Individuals can exclude up to $250,000.
The basis of property is generally the property's cost: the amount paid for the property in cash or other property. [2] Holding period refers to the duration of time owned based on the purchase date. [3] Where an asset is purchased, tax basis generally includes cash paid plus liabilities assumed.
In tax accounting, adjusted basis is the net cost of an asset after adjusting for various tax-related items. [1] Adjusted Basis or Adjusted Tax Basis refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures. Example: Muhammad buys a lot for $100,000. He then erects a retail ...