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Adjusted basis information


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 facility for $600,000, then depreciates the improvements for tax purposes at the rate of $15,000 per year. After three years his adjusted tax basis is $655,000 = $100,000 + $600,000 - (3 x $15,000).

Adjusted basis is one of two variables in the formula used to compute gains and losses when determining gross income for tax purposes. The Amount Realized – Adjusted Basis tells the amount of Realized Gain (if positive) or Realized Loss (if negative).

  1. ^ Bragg, Steven (2023-06-01). "Adjusted basis definition". AccountingTools. Retrieved 2023-07-26.

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