Basis Legal Meaning and Definition

Here is a simplified definition of the legal term Basis.

Basis (noun): In the legal field, basis refers to the original or adjusted cost of an asset or property. This value is important for determining capital gains, the profit made on the sale of the property, for tax purposes. Two common types of basis are:

1. Adjusted Basis: Calculated by adding the initial acquisition cost of the property to the cost of any improvements made.
2. Stepped-Up Basis: Applied to properties inherited after the owner's death. Here, the property's market value at the time of the owner's death becomes the new basis.