Definition: The tax cost of an asset after deducting for
. Basis is adjusted upward by improvements or downward by depreciation.
See Also: Depreciation, adjusted basis , cash basis, accrual basis.
Tips: Basis is used to calculate depreciation and amortization deductions and to determine gain or loss on the sale or other disposition of an asset. Most small businesses use cash basis, while many medium businesses claim to use accrual basis; however, most are not using a true accrual-basis method but are rather using a hybrid method.