basis

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see base. The plural form is bases.

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1. Original cost of an asset plus capital improvements, from which any taxable gains (or losses) are determined, after deducting depreciation expenses. In investments, the purchase price, plus out-of-pocket costs such as brokers' commissions, is used in computing short-term or long-term capital gains reportable to the Internal Revenue Service.

2. In the futures market, the difference between the Spot price, or cash market price, of a security (or commodity) and its price in the futures market. As the delivery date of a Futures Contract approaches, this difference gradually disappears, and at maturity the cash market and futures market prices should be the same. Most investors use financial futures only as a hedging tool to limit possible losses as interest rates change.

3. Number of days used in calculating the interest earned in an investment or interest payable on a bank loan. Also called the accrual base.

There are different interest calculation methods:

365-day year base-savings and time deposit accounts paying interest from date of deposit to date of withdrawal, U.S. Treasury bills, and bank loans (interest computed using actual days in the loan). Also called money market basis.

360-day year base-federal agency securities, municipal bonds, corporate bonds, and London Interbank Offered Rate (Libor) based instruments. Also called corporate bond equivalent basis.

The difference in interest earned, comparing a 360-day year and 365-day year can be substantial with a large principal invested. For example, $100 invested at 8%, using a 360-day year earns $8.00 at 360 days, whereas $100 invested at 8% using a 365-day year earns $7.89 at 360 days. Comparing interest yield on an investment with a 365-day yield basis to one with a 360-day year is easy; to convert from 365- to 360-day interest, simply multiply the 365-day interest by 1.0139; to convert from 360- to 365-day interest, multiply the 365-day interest by .98630.

4. In Foreign Exchange adjustment in the forward market price of different currencies for variance in interest rates. For example: if interest rates are 5% above U.S. Rates, British pound sterling is priced at a 5% discount vis-‡-vis the U.S. Dollar, allowing different currencies to be traded on a comparable basis. See also Purchasing Power Parity.

noun

1. The lowest or supporting part or structure: base, bed, bottom, foot, footing, foundation, fundament, ground, groundwork, seat, substratum, underpinning (often used in plural). See over/under.
2. That on which something immaterial, such as an argument or a charge, rests: base, footing, foundation, fundament, ground (often used in plural), groundwork, underpinning (often used in plural). See over/under.
3. A justifying fact or consideration: foundation, justification, reason, warrant. See true/false.
4. An established position from which to operate or deal with others: footing, status, term (often used in plural). See connect.
5. A fundamental principle or underlying concept: base, cornerstone, foundation, fundament, fundamental, root, rudiment (often used in plural). See over/under.

n

Definition: foundation
Antonyms: apex, summit, top

This entry contains information applicable to United States law only.

The minimum, fundamental constituents, foundation, or support of a thing or a system without which the thing or system would cease to exist. In accounting, the value assigned to an asset that is sold or transferred so that it can be determined whether a gain or loss has resulted from the transaction. The amount that property is estimated to be worth at the time it is received for tax purposes.

1. The variation between the spot price of a deliverable commodity and the relative price of the futures contract for the same actual that has the shortest duration until maturity.

2. A security's basis is the purchase price after commissions or other expenses. Also known as "cost basis" or "tax basis".

3. In the context of IRAs, basis is the after-tax balance in the IRA, which originates from nondeductible IRA contributions and rollover of after-tax amounts. Earnings on these amounts are tax-deferred, similar to earnings on deductible contributions and rollover of pretax amounts.

Investopedia Says:
1. As there are gaps between spot and relative price until expiry of the nearest contract, the basis is not necessarily accurate. In addition to the deviations created because of the time gap between expiry of the futures contract and the spot commodity, product quality, location of delivery, and the actuals may also vary. In general, the basis is used by investors to gauge the profitability of delivery of cash or the actual, and they also use it to search for arbitrage opportunities.

2. This figure is used to calculate capital gains or losses when a security is eventually sold.

3. Distributions of amounts representing basis in an IRA are tax-free. However, in order to ensure that this tax-free treatment is realized, the taxpayer must file IRS Form 8606 for any year that basis is added to the IRA and for any year that distributions are made from any of the individual's Traditional, SEP and/or SIMPLE IRAs. Failure to file Form 8606 may result in double taxation of these amounts and an IRS-assessed penalty of $50.

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IN BRIEF: A thing on which something rests or depends.

Science is the refusal to believe on the basis of hope. — Carrie P. Snow

Tutor's tip: The "basses" (singers in a low register) performed the "basis" (support, fundamental principle) of their program at the "bases" (military installations).

LearnThatWord.com is a free vocabulary and spelling program where you only pay for results!

The lower, basic or fundamental part of an object, organ or substance, or the part opposite to or distinguished from the apex. See also base.

n

The principal active ingredient in a prescription.

For a list of words related to basis, see:

• Income Tax - basis: cost or value when placed in service of depreciable asset plus or minus certain adjustments
• Accounting - basis: cost adjusted by certain expenses, salvage value, and excess depreciation, used in calculating gain or depreciation
• Order, Hierarchy, and Systems - basis: principal component of something; essential condition

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See words rhyming with "basis."

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

Dansk (Danish)
n. - basis, grundlag

idioms:

• basis point    udgangspunkt

Nederlands (Dutch)
basis, grondslag, uitgangspunt, fundament

Français (French)
n. - (lit, fig) base, (fig) conditions, (Fin) assiette (de TVA)

idioms:

• basis point    point de base

Deutsch (German)
n. - Basis, Grundlage, Ausgangspunkt

idioms:

• basis point    (econ.) Basispunkt

Ελληνική (Greek)
n. - βάση, θεμέλιο

idioms:

• basis point    το ένα εκατοστό του ένα τοις εκατό

Italiano (Italian)
base, punto di partenza

idioms:

• basis point    fondamento

Português (Portuguese)
n. - base (f), princípio (m) fundamental

idioms:

• basis point    ponto de base

Русский (Russian)
основа, основная часть, фундаментальный принцип

idioms:

• basis point    основное положение

Español (Spanish)
n. - base, punto de partida

idioms:

• basis point    punto de base

Svenska (Swedish)
n. - bas, basis, grundval, grund, förutsättning

中文（简体）(Chinese (Simplified))
基础, 主要成分

idioms:

• basis point    基点

中文（繁體）(Chinese (Traditional))
n. - 基礎, 主要成分

idioms:

• basis point    基點

한국어 (Korean)
n. - 기초, 기준

日本語 (Japanese)
n. - 基礎, 根拠, 主成分

idioms:

• basis point    100分の1パーセント

العربيه (Arabic)
‏(الاسم) أساس, , أصل, قاعدة‏

עברית (Hebrew)
n. - ‮יסוד, בסיס‬

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Some good "basis" pages on the web: