Video: Examples of Calculating Tax Basis

In this lesson, Nick Palazzolo, CPA, simplifies the seemingly complex process of calculating tax basis with some easy-to-follow examples. Starting with the basis of purchased equipment, Nick breaks down which costs to include—from the purchase price to installation costs—highlighting the practical aspects of how these figures contribute to depreciation expenses. He ensures to clarify why a straightforward approach is taken in the lesson as opposed to using the Modified Accelerated Cost Recovery System (MACRS). The lesson shifts to real estate with a scenario involving a condominium purchase, where Nick dissects the components of the tax basis, including both cash payment and mortgage aspects, emphasizing the importance of understanding the basis for future sale, exchange, or disposal of assets. With Nick's guidance, the concept of tax basis is demystified, revealing its critical role in various tax implications.