Increases in basis decrease the amount of gain realized or increase the amount of realized loss.

Question

Quizplus · Accepted Answer

When the basis of an asset increases, the gain realized upon sale of that asset decreases because the basis is subtracted from the sale price to calculate the gain. On the other hand, if the basis increases and the asset is sold for less than the basis, it would increase the realized loss. Therefore, an increase in basis decreases the amount of gain realized or increases the amount of realized loss.

Increases in Basis Decrease the Amount of Gain Realized or Increase