Adjusted tax basis is used in determining gain or loss from disposition of the asset.
[2] Holding period refers to the duration of time owned based on the purchase date.
[3] Where an asset is purchased, tax basis generally includes cash paid plus liabilities assumed.
[5] For example, if Joe claimed $25,000 of depreciation deductions on his building, his adjusted basis would be the $90,000 as above less $25,000, or $65,000.
Some jurisdictions (e.g., Germany) allow a deduction for decline in value of certain assets, which reduces tax basis.
The member's basis is adjusted each year for his share of the entity's income or loss.
[7] Tax basis of property acquired by inheritance (i.e., from a decedent) is the fair market value at the date of death.
[11] Tax basis may be further adjusted for certain computations relating to controlled foreign corporations in the U.S.[12]