I have a 125 amp service panel for my basement, being fed from the line side of my 200 amp service panel. Is this legal? Does the 10 foot tap rule apply here?

Are you sure you have a supply feeder tap to a second panel board and not a feeder off the main panel to a sub-panel?

According to the NEC, there can only be one service entrance point. So, where is the tap, off the meter to panel line, inside the home or on the outside with a separate entry point?

Have you had a licensed electrician do a load calculation for you?

NEC -2008 Article 240.21(B)(1 through 5)discuss taps. Section 1 Deals with taps not over 10'. Section 2 deals with taps not over 25'. Which do you have?

What is the connected load on the second panel?