Core idea
Tax basis measures a taxpayer's unrecovered investment for tax purposes. It can increase, decrease, carry over, step up, or limit deductions depending on the transaction.
REG topic guide
Tax basis for REG CPA candidates.
Tax basis questions are easier when you stop treating basis as one formula. Different taxpayers and transactions create different basis stories.
Last reviewed June 5, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.
What REG likes to test
Expect property purchases, gifts, inheritances, partnership interests, S corporation stock and debt basis, distributions, liabilities, depreciation, and suspended losses.
Common miss
Candidates often use fair value when the rule asks for adjusted basis, or they forget that liabilities can change owner-level basis in entity questions.
How to practice
Label the taxpayer first, then track beginning basis, increases, decreases, and the tax consequence that basis controls.
REG topic guides
Keep going with related REG topics.
Practice loop
Use the topic, then answer questions while the idea is fresh.
Short practice sets are enough to expose whether the rule is sticking.