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Adjusted Tax Basis

Typically, the net cost of a property determined by the original cost of property (the original tax basis) less any depreciation deductions plus any capital expenditures. The adjusted tax basis is important upon the sale of a property.

Example:  Dave buys a vacant plot of land for $150,000.  He builds a warehouse for $700,000, then depreciates the improvements (for tax purposes) at the rate of $20,000 per year.  After 5 years his adjusted tax basis would be: $750,000 ($150,000 + $700,000 - (5 x $20,000)).