Tax Basis of Assets

The tax basis of an asset is the cost of acquiring it. This includes the purchase price and other associated costs. The tax basis is important in business for depreciation of the asset, and it is needed in personal finance to calculate capital gains taxes when you sell, give away or otherwise dispose of the asset. Assets that were a gift or purchased for less than market value are treated differently when calculating tax basis.

Regular Assets

An acquired asset, such as a vehicle, has a taxable basis equal to its cost, which includes the purchase price, sales tax and excise taxes. Included are any installation charges and testing fees related to the purchase.

Stocks and Investments

The tax basis of stocks or other investments is the price you paid for the investment, as well as commissions, recording fees and brokerage fees. If you receive investments some way other than by purchase, such as a gift, the tax basis is the fair market value at the time you acquire the investment -- the previous owner's tax basis.

Low-Interest Loans

If part of the purchase of an asset includes a low- or no-interest loan, the value of the interest on the loan must be subtracted from the acquisition cost of the asset. For example, you purchase a vehicle for $12,000, the seller accepts payments for one year interest-free and the value of the interest on the loan is $1,000, the tax basis of the vehicle is $11,000.

Property Received for Services

If you receive property in exchange for services you perform, claim the fair market value of the property received as income, and pay taxes on that income. The amount that you claimed as income is the tax basis for the property you received.

Primary Residence

The tax basis on your primary residence is the amount of money you paid for the home. Any closing costs are included in the basis, such as deed recording fees, legal fees and title search fees. The price of any improvements you make to the home while you own it may be added to the tax basis.

Capital Gains

Capital gains taxes must be paid on the amount of profit or gain you receive when you sell the property. If an item has a basis of $20,000, and you sell if for $30,000, you have a gain of $10,000. If you have owned the asset for more than one year, capital gains tax is 15 percent, or $1,500, in 2012.

About the Author

Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.

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