Basis Archives | Value Investing - Business and Economic Principles

Basis

Basis is a term referring to the book value of investments (securities) or other assets. Basis includes the original purchase price and fees associated with the purchase and maintenance of the asset. In addition other costs are included in the basis calculation including time based costs (interests, brokerage maintenance costs), registration and government taxes. This term is most commonly found within the tax code and is used to determine gain or loss associated with the sale of the particular investment.

Railroad Fund – Status on 01/31/2020

Railways Pool / By David J Hoare MSA / 02/15/2020

During the last 30 days, the fund held 13.52375 shares (original investment of $2,500) and sold them on 01/17/2020 at 9:40 AM when the price in the market hit the target under the value investment principle at $207.17. The value investing principle (simply stated) required the share price to hit the prior peak price which was $206.46. However, on that morning, the share price instantly jumped past $206.46 to $207.17 triggering the sale of the stock. The gain on the sale net of costs of $1.00 per share to buy and $1.00 per share to sell was $288.19. The stock was purchased on 10/23/19 at $183.86.

Basis in Business

Specialty Taxes / By David J Hoare MSA / 10/01/2017

Basis is a business term used to identify the value of an individual or entity’s investment in an entrepreneurial endeavor. It is customarily linked to taxation as this term is used by the Internal Revenue Code to determine gain or loss. To further compound its meaning ‘basis’ is sometimes substituted for the term ‘equity’.

Negative Basis in Business – Tax Shelters

Terminology / By David J Hoare MSA / 04/21/2015

Negative basis in business refers to the value of the equity investment in the company. It literally means you have no actual equity investment and worse you owe somebody money because other parties have fronted the necessary capital to make the business viable.

Capital Gains – Introduction to Fundamentals

Terminology / By David J Hoare MSA / 04/03/2015

When an individual or business sells an asset, the gain or loss is classified into one of two distinct tax groups – ordinary or capital. The tax classification is strictly tied to the nature of the asset sold. For most businesses, the assets sold are inventory.

Landlord – Business Dynamics and Economics

REITs Pool, Investment Fund / By David J Hoare MSA / 03/06/2015

I love the game of Monopoly. My sons enjoy playing it too. But we all have the same complaint about the game; it takes forever to accumulate all the wealth and ultimately win the game. Being a landlord means the same thing. It will take a long time to accumulate wealth. For those of you considering becoming a landlord, there are certain business dynamics and economics you should understand.

Basis for Tax Purposes

Specialty Taxes / By David J Hoare MSA / 02/19/2015

Basis is a term used in computing gains and losses on the disposition of an asset. For any business owner or individual taxpayer it is important to understand what the Internal Revenue Service (IRS) is really seeking. What is your tax basis in an asset?

At-Risk Rules – An Elementary Understanding

Income Taxes / By David J Hoare MSA / 10/28/2014

Code Section 465 of the Internal Revenue Code defines ‘At-Risk’ as the financial value the taxpayer has in jeopardy related to the business activity the taxpayer is invested in as some form of an owner. Effectively, the taxpayer may only take losses on his tax return contingent on the loss being directly tied to invested dollars with some form of tax basis.

Book Value – Definition and Usage

Phase II - Financial Analysis / By David J Hoare MSA / 05/15/2014

There are several definitions associated with the term ‘Book Value’ and depending on the context of its use, determines the correct definition and proper use.