What is outside basis?
Outside basis is the IRS-defined tax cost of your ownership in Craft Pod. It determines how much loss you can deduct and whether any distributions are taxable.
What determines your outside basis?
Cash contribution: adds dollar-for-dollar to basis.
Stock contribution: adds only the stock’s original tax basis (not its market value).
Share of Pod liabilities: also increases basis.
Basis also increases when you earn income or contribute more capital. And decreases when you deduct losses or receive cash/property from the Pod.
Why outside basis matters
Your basis caps how much bonus depreciation and other losses you can deduct. Higher outside basis allows you deduct more.
Simple example:
Contributor type | Initial contribution | Starting basis | Year one depreciation | Deductible (Year 1) | Suspended loss |
Cash investor | $1,000,000 | $1,000,000 | $400,000 | $400,000 | 0 |
Stock investor | $1,000,000 stock with $50,000 basis | $50,000 | $400,000 | $50,000 | $350,000 |
Suspended losses can be used later when your basis increases through income or additional contributions.
Always consult your tax advisor regarding how these losses will affect your individual tax situation.
Cash usually gives you higher immediate basis and larger deductible depreciation.
Low basis stock still diversifies your position but may postpone some deductions.
The fund administrator tracks basis annually to ensure you don’t claim more than allowed.
Relationship to other rules
• At risk rules use outside basis as the starting point
• Passive activity rules decide where the loss can be applied
• Excess business loss cap can delay large net losses after basis and at risk tests
Please read our full disclosures before making an investment decision.