It requires an adjustment to the basis of the old property. The basis of the property acquired is the basis of the old property less any money received in trade or any loss recognized on the trade plus any additional costs incurred or any gain recognized on the exchange. In making that division, the basis of the unlike property is its fair market value on the date of the exchange. The balance of the basis is then allocated to the like-kind property. Adjusted Basis Adjusted basis is used in calculating capital gain or loss.
Adjusted basis reflects increases or decreases in the book value of an asset through time.
The book value is the value which will be used to compute depreciation and gain or loss on the sale of the asset. Increases in basis result from improvements that add to book value . Decreases in basis result from depreciation, casualty loss, and other reductions in book value of the property. Adjusted basis is not a result of inflation and consequent change in the market value of assets. Increases in Basis.