Adjusted Basis

Definition

  • Refers to the amount used to determine profit or loss from a sale or property trade. To calculate this amount for an asset, take the original amount paid, add improvement and assessment costs, and then subtract deductions. Deductions can include down grading, depreciation, or depletion.

Synonyms
actual value, compute gain or loss, calculated

Related Terms and Acronyms

  • Actual Cash Value (ACV) Acronym,
    • The replacement cost of an insured asset with depreciation accounted for.
    • The amount of money that a broker or dealer has invested in the purchase and repair of a used vehicle.
  • Asset Definition,
    • Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others including bank accounts, stocks, mutual funds, and so on.
  • Basis Definition,
    • Relating to cost basis, this is the amount assigned to an asset from which a taxpayer determines capital gain or loss. For assets purchased, the basis is the price paid. Special rules apply to assets acquired through gift or inheritance, as well as to the value of stock funds held for a period during which earnings are reinvested.
    • That on which a thing rests or is founded.
  • Capital Gain (CG) Acronym, Important,
    • The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • Capital Loss Definition,
    • When an asset is sold for less than what you paid, or less than its adjusted basis, it is a capital loss. However, when it comes to taxes a capital loss is not always bad because you can use it to reduce the amount of income being taxed by the amount of the loss, up to $3,000 per year. If your loss is more significant, the excess (or capital loss carryover) can be carried forward indefinitely until the total loss is used.
  • Depreciation Definition,
    • The gradual loss of value of a building or other property because of age or natural wear.
  • Non-liquid Asset Definition,
    • A possession that can't be transformed readily into cash. Stocks and bonds are liquid assets because they can be sold easily; a house is a non-liquid asset because it takes time to sell.
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