Adjusted Tax Basis is a term used for tax purposes that refers to the difference between the original cost and any increases or decreases in value. This is important when calculating taxable gain or loss from the sale of an asset. It’s also applicable when transferring an asset from one party to another, such as gifting or inheritance. In addition, it acts as a point of reference when calculating depreciation or making adjustments to the carrying value of an asset. The adjusted tax basis is determined by accounting for increases (such as improvements) and decreases (such as impediments) in value over time. Ultimately, the adjusted tax basis allows businesses to ensure they pay the correct amount of tax on any transaction involving capital assets.