An adjusted basis, or adjusted tax basis, refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures. It serves as the base amount from which to measure gains and losses for tax purposes.
The concept of depreciable basis is essential in determining the amount that can be depreciated for tax purposes. It represents the initial cost of an asset, including certain expenditures necessary to put the asset into use.
Unrealized appreciation refers to the increase in the value of an asset that has not yet been sold, calculated as the excess of the asset's fair market value over its adjusted basis. This appreciation is recognized for financial reporting purposes but does not incur income tax until the asset is sold.
Unrealized depreciation refers to the excess of the adjusted basis of an asset over its fair market value, for determining losses on the sale or other disposition of the asset.
