Question

What is the best definition of tax basis? Make sure to provide detail on why your definition is the “best”

Answer 1

Tax basis can be defined as purchase price of an asset, including commissions and other expenses, used to determine capital gains and capital losses for tax purposes. This can be determined by several methods. For a purchased investment, the tax basis is the amount paid. If inherited, the tax basis is the value of the stock on the date of the original owner's death. If received as a gift, the tax basis is the amount that was originally paid for the investment, unless the market value of the investment on the date the gift was given was lower also called cost basis. For example, tax basis of an asset purchased for $100,000 with to date depreciation of $30,000 is $70,000. If the asset is sold for $150,000, the capital gains tax will be computed on $80,000.

This is the best possible definition becauses I have covered all bases( whether puchased,inherited or received as a gift) and also included an example.