Cost basis refers to the original value or purchase price of an asset, which is used for tax purposes. It is the amount that is typically used to calculate capital gains or losses when the asset is sold or disposed of. In essence, it serves as the starting point for determining the taxable gain or loss associated with an asset’s sale or transfer. Cost basis can be adjusted for various factors such as transaction costs, improvements, and depreciation, depending on the type of asset and relevant tax rules.
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