Basis is your investment in property for tax purposes. The difference between the selling price of your assets and your basis determines whether there is a taxable gain or loss on the disposition of your property. You need to determine your basis to figure allowable depreciation deductions as well. Your original basis is usually your cost to acquire the asset. Your adjusted basis (which is the basis you use to determine gain or loss or depreciation amounts) is the result of increasing or decreasing your original basis according to certain events.

• Increases to basis include but are not limited to:
• Improvements having a useful life of more than a year
• Assessments for local improvements
• Sales tax
• The cost of extending utilities lines to the property
• Legal fees such as the cost of defending or perfecting title
• Zoning costs

Decreases to basis include but are not limited to:

• Depreciation
• Nontaxable corporate distributions
• Casualty and theft losses
• Easements
• Rebates from the manufacturer or seller

Additional information on basis can be found in Publication 551, Basis of Assets, or Tax Topic 703, Basis of Assets.

• Publication 551, Basis of Assets
• Tax Topic 703, Basis of Assets

Source: www.irs.gov