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Section 1012 of the
Internal Revenue Code defines “basis” as a taxpayer's cost in acquiring property, except as provided in Sections 1001–1092. Section 1016 then lists 27 adjustments to this basis. Generally, improvements to property increase basis while depreciation deductions decrease it.
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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).
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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).
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74:'s original cost basis, and then making adjustments. Adjusted basis is calculated as follows:
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Selling costs (title & escrow fees, broker commissions, shipping, transfer fees, etc.)
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Purchase costs (title & escrow fees, broker commissions, shipping, sales tax, etc.)
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Adjusted basis is crucial for calculating capital gains and ordinary gains when an
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Legal fees (to defend or to perfect title to the property, zoning costs, etc.)
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A complete list of adjustments which increase or decrease basis is found in
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is the net cost of an asset after adjusting for various tax-related items.
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Improvements (rehabilitation expenses & substantial repairs)
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34:refers to the original cost or other basis of
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127:Publication 551, Basis of Assets.
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91:Minus the costs represented by:
188:Accounting in the United States
173:Adjusted cost basis Calculator
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144:Bragg, Steven (2023-06-01).
146:"Adjusted basis definition"
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107:Other decreases to basis
96:Accumulated depreciation
193:Accounting terminology
104:Casualty or theft Loss
57:Statutory definition
32:Adjusted Tax Basis
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98:, depletion, or
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153:. Retrieved
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66:Calculation
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155:2023-07-26
131:References
198:Tax terms
120:is sold.
46:Example:
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125:IRS
30:or
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