Basis is your investment in a property. For tax purposes, use the basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale or exchange of the property. The basis of property you buy is usually its cost. The cost is the amount you pay for it in cash, debt obligations, or other property or services.
Cost includes sales tax and other expenses connected with the purchase.
Your basis in some assets cannot be determined by cost. If you buy stocks or bonds your basis purchase is the price plus any additional costs of purchase such as commissions and recording or transfer fees. If you have stocks or bonds that you did not purchase , you must determine their basis depending on how you acquired them. Before you can figure any gain or loss on a sale, exchange, or other disposition of property, or figure allowable depreciation, you must determine the adjusted basis of that property. Increase your basis by items such as the cost of improvements that add to the value of the property, and decrease it by items such as depreciation allowable, insurence reimbursements for casualty and theft losses.