BASIS Definition

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BASIS, generally, is that figure or value that is the starting point in computing gain or loss, depreciation, depletion, and amortization of a company. Specifically, it is the financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was acquired by purchase, the owners basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the ADJUSTED BASIS.

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BACKUP WITHHOLDING is a mandatory withholding that may be imposed when rules regarding taxpayer identification numbers, (usually a Social Security number) are not met by the individual. Another way for these withholdings to take effect is when a notice is issued by the IRS to withhold on payments to that individual. Backup withholding may be claimed as a credit by taxpayers on their federal income tax return.

PURCHASE AND INSTALLMENT SALEBACK, in real estate, is a contract purchase of real property upon the completion of construction. The subject property is then immediately sold back on a long-term installment contract.

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