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

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.