How is cost basis defined in tax terms?

Cost basis in tax terms is defined as the original value of an asset plus any associated costs that were incurred to acquire it. This includes not only the purchase price but also additional expenses such as commissions, fees, and improvements made to the asset. The cost basis is crucial for tax purposes as it determines the capital gains or losses when the asset is sold.

By calculating the difference between the sale price and the cost basis, an individual can ascertain their profitability. Therefore, understanding cost basis is essential for tax reporting and ensures that taxpayers are accurately representing their financial transactions related to the buying and selling of assets. This comprehensive view makes option B the most accurate definition in the context of tax terminology.