Basis
Basis is the amount the tax law treats as your investment in property, used to figure gain or loss when you sell it. It usually starts at cost and changes with improvements and depreciation.
Inherited property generally takes a basis equal to fair market value at the date of death. Gifted property generally keeps the donor's basis, with a special rule for losses when the value at the gift date is lower.
Example. Hank bought land for $50,000 and it was worth $200,000 when he died. His heir's basis is $200,000, so a sale for $205,000 gives only $5,000 of gain.
By Binod Raj Singh, CPA (licensed in Montana) · Updated for the 2026-2027 exam windows · Last updated 2026-11-05