How does the basis of purchased property determined?

The basis of purchased property is typically determined by the purchase price, which includes the amount paid for the property plus any associated costs, such as closing costs, legal fees, and certain improvements made to the property. Additionally, any debt assumed or liabilities taken on as part of the purchase may also be included in the basis. Adjustments can be made for depreciation or any other factors affecting the property's value over time. This basis is essential for calculating capital gains or losses when the property is eventually sold.