For tax purposes, basis refers to your investment in property.  It usually means what it cost you.  For instance, if you sold 100 shares of stock for $100 each, a necessary tax question would be “What is your basis?”  That would be what you paid for the stock.  If you paid $50 per share, you basis for this transaction would be $5,000 and the amount used to compute the income tax you owed for this transaction would be the total selling price ($10,000) minus the basis ($5,000) or $5,000.  Taxes would NOT be couputed on the entire selling price of $10,000.