Basis, in the context of commercial real estate, is an asset’s basis is the original purchase price or cost of investment property plus any out-of-pocket expenses or closing costs related to the acquisition of the property. Also known as “cost basis” or “tax basis”.
For example, if an investor purchases a property for $1,000,000 and pays $10,000 for title insurance and another $10,000 in loan fees, their initial basis in the property would be $1,020,000.
It is important to note that a taxpayer’s tax basis in a given asset may include several other adjusting factors such as accumulated depreciation deductions claimed during the time of ownership or the value of deferred capital gains from tax deferred exchanges executing during the acquisition of the asset. This is known as Adjusted Basis.
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Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment.
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested.
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