Adjusted basis is the original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions the owner has claimed during the time of ownership less any previously deferred capital gains.
For example, if an investor purchases a property for $1,500,000, incurs $10,000 in closing costs, makes $50,000 in capital improvements and claims $400,000 of depreciation over the holding period, and had $200,000 of previously deferred gains, their adjusted basis would be $960,000 ($1,500,000 plus $10,000 plus $50,000 less $400,000 less $200,000).