Used in determining depreciation or gain or loss on the sale of property In the simplest situation, your basis in property you purchase is the cost For example, you pay $1,000 for a machine--that's your basis How you acquire the property determines your basis For example, if you inherited the machine, your basis would be the fair market value at the decedent's death In a simple tradein, your basis is equal to your adjusted basis (see above) in the equipment traded in plus any cash paid If you contributed the property to a corporation, the corporation's basis would be the basis of the property in your hands Your basis in the stock in an S corporation is your cost plus profits taxed to you less losses passed through and distributions There are a number of other ways of arriving at basis Please see Adjusted Basis, above