Video: Costs Included in a Asset's Taxable Basis

In this lesson, the intricacies of calculating an asset's taxable basis are thoroughly dissected by Nick Palazzolo, CPA. He delves into the different types of costs that can be capitalized and included in an asset's depreciable base for tax purposes, such as purchase price, sales tax, shipping, and installation costs. Nick offers practical wisdom by differentiating between the tax basis used for calculating gains or losses and the depreciable base used for depreciation deductions. He explains why certain costs are capitalized, enhancing understanding with real-world comparisons between financial statement reporting and tax reporting. This lesson also clarifies when improvements should be capitalized versus when repairs and maintenance costs are expensed, providing a clear rationale that eases the grasp of these complex tax concepts. With his relatable teaching style, Nick ensures these foundational elements are well understood, setting the stage for more in-depth practice with examples and scenarios tailored to the exam.