Income Tax Basis

Definition:

(1) For tax purposes, the concept of basis determines the proper amount of gain to report when an asset is sold. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as deprecation and amortization.

(2) For accounting purposes, a consistent basis of accounting that uses income tax accounting rules while generally accepted principles (GAAP) does not.

Related terms:

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