Basis Definition and Legal Meaning

(n) Basis is used to denote the costing of a property while arriving at the profit earned to calculate the capital gain tax when that property is sold. There are two basis used to derive the cost of property sold. One is adjusted basis which is calculated as cost of acquisition plus cost of improvements. Stepped up basis is used on the property inherited after death of the owner where current vale at the time of death is taken as the cost.