Tax Basis and Book Basis are two different ways of tracking profits in a business. In simple terms, Tax Basis is what you report to the IRS for tax returns, while Book Basis is what you would record in your corporate books.
The major difference is that Tax Basis uses typically more conservative measures when calculating profits, such as taking into account deductions, credits, and other expenses, whereas Book Basis typically focuses more on the company’s revenue. To put it in a nutshell, Book Basis focuses more on how much money the company made, while Tax Basis takes into account more factors to calculate how much an organization owes to the government.