* Major tax bills are not enacted by congress every year. However, every year there are tax law changes which may affect you. Additionally, your individual circumstances may vary just enough each year to make you eligible/ineligible for tax advantages.
Original basis is usually the original cost of your investment/asset. Often there are adjustments to basis. These adjustments may be items such as reinvested dividends for mutual funds or refinance costs and capital improvements for real estate. It is important to keep records/track these activities as they adjust your original basis and impact your taxable gain/loss.
You buy shares of a mutual fund for $1,000. During the holding period of your investment, you have $300 of reinvested dividends and capital gains. You have paid tax on this $300 in the year(s) it was reported; this will adjust your basis to $1,300. If you sell your shares for $1,400, you need only recognize and pay tax on $100. If you sell your shares for $1,200, you will report a loss of $100.
RECOMMENDED READING LIST
Nolo Press (http://www.nolo.com) in Berkeley, CA publishes easy-to-read tax and legal guides.
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