Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Adjusted Basis

What it is:

Adjusted basis refers to the increase or decrease in an asset's value due to depreciation or capital enhancements.

How it works (Example):

From the time an asset is acquired until the time it is sold, an asset experiences a number of events which affect its value. These events can cause an increase or decrease in the asset's total value. An asset's adjusted basis takes the base price of an asset and adjusts it for changes in value reflecting enhancements and or depreciation. For instance, a given asset purchased for $100 that is sold one year later after having experienced $10 in depreciation and $50 in improvements would have an adjusted basis of $100 - $10 + $50 = $140.

Why it Matters:

In the event an asset is sold, the adjusted basis is needed for tax purposes as it is used to calculate the capital gain or loss.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...