substituted basis

noun | \ ˈbā-səs \ | ba·sis

1. : something (as a principle or reason) on which something else is established the court could not imagine any conceivable basis for the statute — see also rational basis

2. : a basic principle or method; especially : the principle or method by which taxable income is calculated : the principle or method by which taxable income is calculated

   Note: The Internal Revenue Code has set some limits on which method a taxpayer may use for figuring taxable income. For example, a corporation with gross receipts under $5,000,000 may be a cash-basis taxpayer.

   — accrual basis
   : a method of accounting in which income and expenses are recorded in the period when they are earned or incurred regardless of when the payment is received or made — called also accrual method

   — cash basis
   : a method of accounting in which income and expenses are recorded in the period when payment is received or made — called also cash method

3. : the value (as cost or fair market value) of an asset used in calculating capital gains or losses for income tax purposes

   — adjusted basis
   : the basis of an asset increased or decreased to reflect changes in value (as through improvement or depreciation)

   — carryover basis
   : the basis of a donated or transferred asset that is equal to the basis of the asset when it was in the hands of the donor or transferor Note: Carryover basis is generally applied to gifts and to transfers in trust.

   — cost basis
   : the basis of an asset equal to the amount paid for the asset plus other acquisition costs

   — stepped-up basis
   : the basis of inherited property equal to its market value at the decedent's date of death or to an alternate valuation

   — substituted basis
   : the basis of property received in exchange for property of a like kind that is equal to the basis of the property given with adjustments for additional consideration received or gains and losses realized