Basis Price
There are actually two ways to describe the value of a debt security, like a bond.
They have a price, just like a stock or any other asset. This describes the amount of cash it would take to buy them. Bonds also come with yields, which describe how much an investor will make on their investment on an annual basis. This second category is also called its basis price. So a bond with a yield of 6% has a basis price of 6% as well.
Okay, just to explain the name a bit:
Interest rates and yields are often described in what is called "basis points." A basis point is one one hundredth of a percent. So a bond with a 6% yield also has a yield of 600 basis points.
Might seem like semantics, but it clarifies changes in prices. If you have a bond yielding 6% and you say that the yield "rose by 1%"...uh, yeah. That's a little ambiguous. It could mean that it increased one percentage point to 7%, or that it increased by 1%, meaning it increased to 6.06%. Talking about the yield in terms of basis points fixes the problem. "The yield increased by 100 basis points" creates no confusion. Unless, like, you're talking to a complete noob.
Anyway, that terminology provides the "basis" part of the "basis price."
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Finance: What is Tax Basis?8 Views
Finance allah shmoop What is tax basis Well your basis
is your cost Your costs for assessing how much you
owe when the tax man coming you bought a thousand
shares of whatever dot com at twelve bucks a share
in its eye po and huzzah Three years later the
stock is at thirty You decide whatever dot com is
now passe because a kardashians said so it'll be over
taken by whenever dot com and you want to sell
So you dio and you live in a thirty percent
marginal tax blue state And that is your federal tax
rates in twenty percent But then you add in ten
percent for state taxes and whatever's left for obamacare and
you pay about thirty percent tax on your gains Well
you paid twelve grand to buy the stock and after
the sale you took in thirty grand when you sold
it for a gain of eighteen thousand dollars Your tax
basis on those shares is twelve grand so you pay
thirty percent tax on the eighteen grand of gain or
fifty four hundred dollars to net from the sale of
thirty thousand dollars worth of stock How much Yeah twenty
Four thousand six hundred dollars He fancy math Had you
just gotten those shares free I'ii they were gifted to
you and you had no tax basis or a tax
basis of zero dollars a share Well then your gain
would have been from zero to thirty grand or a
gain of thirty thousand dollars to then be taxed at
thirty percent or nine grand in taxes to net just
twenty one thousand dollars after the sale So having ah
high tax basis or at least being able teo point
toe one saves you money when the tax man coming
and well that's pretty much it alright he's gone Now
you can all come out Come on it's Okay it's 00:01:53.698 --> [endTime] safe
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