A more thorough explanation:

Under U.S. tax law, basis refers to the cost or value of an asset. It is used to determine equity or ownership for tax assessment, exchange, or sale purposes. Basis includes the purchase price, taxes, transportation costs, and fees. It is adjusted based on what happens to the property during the owner's period of ownership to determine the owner's adjusted basis.

For most assets, the basis is the cost of acquisition, which includes amounts paid by cash, debt obligations, and other property or services. For common assets like stocks and bonds, basis is generally the purchase price plus additional costs such as commissions and recording or transfer fees.

Expenses that increase basis include rehabilitation expenses, the cost of extending utility service lines to a property, impact fees, legal fees for defending and perfecting title, and zoning costs. For example, if you buy a property and spend money on rehabilitating it, the cost of rehabilitation will increase the basis of the property.

Expenses that decrease basis include deductions for clean-fuel vehicles and refueling property, amortization, depreciation, and depletion, postponed gain from the sale of a home, casualty and theft losses and insurance reimbursements, cancelled debt that is excluded from income, rebates from a manufacturer or seller, and easements. For example, if you claim a deduction for depreciation on a rental property, the basis of the property will decrease.

Overall, basis is an important concept in determining the tax consequences of buying, selling, or exchanging assets. It helps to determine the gain or loss on the sale of an asset and the amount of depreciation that can be claimed on certain assets.