Adjustments To Basis
The tax basis of an asset subject to cost recovery must be reduced by deductions allowed for such cost recovery. For example, if Joe claimed $25,000 of depreciation deductions on his building, his adjusted basis would be the $90,000 as above less $25,000, or $65,000. Cost recovery deductions may include depreciation, amortization, and deducted losses or declines in value. Some jurisdictions (e.g., Germany) allow a deduction for decline in value of certain assets, which reduces tax basis.
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