Basis = money that was Post-tax. Amounts invested into that tax deferred account which those contributed funds were Not able to be deducted from taxes when originally contributed are your Basis. Typically, the tax deferral feature of a traditional IRA means anything you take out later is taxed as Ordinary Income. If you previously contributed funds post-tax, that means its your funds that you already paid taxes on. You don't want to pay taxes again on that amount when you finally withdraw funds from that tax deferred account. That would be Double Taxes. So, you track Basis, and then, each distribution is split and allocated into the nontaxable portion based on your Basis in all similar accounts of that nature.
I just did a thorough answer with examples, here:
https://proconnect.intuit.com/community/proseries-discussions/discussion/re-traditional-ira-contribu...
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