Tax

Tax basis

Tax basis is the amount a taxpayer has invested in an asset or business interest for tax purposes. It is used to measure gain or loss on a sale, depreciation and the taxability of a distribution.

Reviewed November 3, 2026

Why it matters

A distribution above basis is taxable, and a sale of an asset or business interest needs the basis to calculate the gain. Missing basis records overstate the tax.

Example

An owner contributes $50,000 to an S corporation and receives a $20,000 distribution. The distribution is generally tax-free while it stays within the owner's basis.

Related terms

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Sources

Checked November 3, 2026. Public pages and tax rules change; confirm them before relying on them.

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