TAX BASIS Meaning and
Definition
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Tax basis refers to the original value or cost of an asset for tax purposes. It is used to determine the taxable gain or loss when the asset is sold, exchanged, or disposed of. The tax basis is crucial as it serves as the starting point for calculating the taxable amount.
The tax basis is typically established when the asset is acquired, whether through purchase, inheritance, or gift. For assets obtained through purchase, the tax basis is generally the purchase price plus any associated expenses such as legal fees or commissions paid. If an asset is acquired through inheritance, the tax basis is typically the fair market value of the asset at the date of the benefactor's death. In the case of a gift, the tax basis is usually the same as the donor's tax basis.
The tax basis can be adjusted over time due to various factors such as improvements made to the asset or deductible depreciation expenses. Adjustments may also occur due to events like casualty losses or corporate stock splits. These adjustments help reflect the current value of the asset accurately.
When an asset is sold or disposed of, the tax basis plays a critical role in determining the taxable gain or loss. The taxable gain is calculated by subtracting the tax basis from the amount received from the sale or disposition. Conversely, if the amount received is less than the tax basis, a taxable loss may be incurred.
Properly determining and maintaining the tax basis of assets is essential for accurate tax reporting and minimizing tax liability.
Common Misspellings for TAX BASIS
- rax basis
- fax basis
- gax basis
- yax basis
- 6ax basis
- 5ax basis
- tzx basis
- tsx basis
- twx basis
- tqx basis
- taz basis
- tac basis
- tad basis
- tas basis
- tax vasis
- tax nasis
- tax hasis
- tax gasis
- tax bzsis
- tax bssis
Etymology of TAX BASIS
The word "tax basis" does not have an etymology of its own as it is a combination of two separate words: "tax" and "basis".
- The word "tax" can be traced back to the Latin word "taxāre", which means "to estimate" or "to tax", and the Middle French word "taxer", which means "to place a tax". Both of these root words ultimately derive from the Latin word "tangĕre", meaning "to touch" or "to deal with".
- The word "basis", on the other hand, comes from the Latin word "basis", which means "foundation" or "support". This Latin word was influenced by the Greek word "basis", with the same meaning.
When combined, "tax basis" refers to the foundation or starting point used to calculate or assess taxes.
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