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What is “tax basis”?

August 12, 2011


From:  Lee
Date:  19 Nov 2008
Subject:  10/3/08 letter “Tax Consequences of a Short Sale...”

In your examples relating to tax consequences of a short sale, you use the term “tax basis.” Does this refer to the owner’s purchase price + improvements – accumulated depreciation, or the assessed value for property taxes?

Thank you

Answer

Date:  4 Dec 2008

Hello Lee,

I am referring to the amount used to determine gain or loss for income tax reporting. Although it might be purchase price + improvements – accumulated depreciation, it can be different for inherited property, property received in a gift, or property acquired in a tax-deferred exchange.

Good luck!
Mike Gray

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What is tax basis, as applied to real estate?

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