Trade means:
a business, profession, or occupation; but also may be a commerce transaction. A trade often implies (or may imply) a skilled handicraft, which is pursued on a continuing basis, such as carpentry. Trade or business expenses are deductible, in contrast to nondeductible […]
Capital Expenditure means:
an improvement (as distinguished from a repair) that will have a life of more than 1 year. Capital expenditures are generally depreciated or depleted over their useful life, as distinguished from repairs, which are subtracted from the income of the current year. […]
Excise Tax means:
a tax imposed on an act, occupation, privilege, manufacture, sale, or consumption. In recent years, this term has been applied to just about every tax except the income tax and the property tax. In general, federal, state, and local excise taxes (e.g., on tobacco, […]
Common Stock means:
security representing an ownership interest in a corporation. Ownership may also be shared with preferred stock, which has prior claim on any dividends to be paid and, in the event of liquidation, to the distribution of the corporation's assets. Dividends from […]
Corporation means:
a legal entity, generally chartered by a state and separate and distinct from the persons who own it, giving rise to a jurist's remark that it has "neither a soul to damn nor a body to kick." Nonetheless, it is regarded by the courts as an artificial […]
About Cost of Goods Sold: Cost of Goods Sold (COGS) ia figure representing the cost of buying raw materials and producing finished goods. Included are clear-cut factors, such as direct factory labor, as well as others that are less clear-cut, such as overhead. U.S. and other Developed […]
Withholding means:
the retaining ("pay-as-you-earn" taxation) by an employer of a portion of an employee's wages for the purpose of paying for various taxes, insurance plans, pension plans, union dues, and other deductions. Money, for example, that employers withhold from […]
Balance Sheet means:
a financial statement that gives an accounting picture of the property owned by a company or individual and of claims against that property on a specific date. The left (debit) side of a balance sheet lists assets; the right (credit) side shows liabilities and […]
Partnership means:
an organization of two or more persons (individuals or companies) who pool some or all of their resources, abilities, and skills in a business and divide the profit or loss in predetermined proportions. Association of two or more person formed for the purpose of making […]
Deficiency means:
the excess of a taxpayer's correct tax liability for the taxable year over the amount of taxes previously paid for that year. It is a concept used in the United States. The U.S. Internal Revenue Service is authorized to assess deficiencies during an audit of the […]
Tax Evasion means:
any method of avoiding or reducing taxes not permitted by law. A failure to pay or a deliberate underpayment of taxes. Such evasion, which involves deceit, subterfuge, camouflage, concealment, or an attempt to color or obscure events, carries heavy penalties. It is not […]
Amortization may have one of the following meanings, depending the context of the term: 1. the systematic write-off of costs incurred to acquire an intangible asset, such as patents, copyrights, and organization expenses, over its useful life. Former IRC (check if this IRC provision is current […]
Capitalize may have one of the following meanings, depending the context of the term: 1. to record capital outlays as additions to asset accounts, not as expenses. See also capital expenditure. 2. to convert a lease obligation to an asset/liability form of expression called a capital lease; […]
Cost Plus Method is. one of five methods for determining an arm's-length price for tangible asset transfers. The arm's-length price is equal to the controlled party's cost of producing the property, plus a gross profit markup.
A tra…
About OECD: The OECD (Organization for Economic Co-operation and Development) is a multilateral organization comprised of 30 countries, which are mostly Western European countries and other industrialized countries including US and Japan. Founded in 1961, the OECD provides a forum for representative…
De Minimis is. of insufficient significance to warrant judicial or tax attention, as in the case of nontaxable de minimis fringe benefits. De minimis reflects the judicial principle of de minimis non curat lex (“the law does not concern itself with trifles”).
About Offshore Company: Term usually applied to a company or corporation registered in a country or jurisdiction (often a tax haven) other than the country, countries, jurisdiction or jurisdictions in which it carries on its business activities. An offshore (or non-resident owned) company is commonl…
Commodities Futures are. contracts in which sellers promise to deliver a given commodity by a certain date at a predetermined price. The price is agreed to by open outcry on the floor of the commodity exchange. A commodity futures contract specifies the item, the price, the expiration date, and a st…
About Underlying Tax: Tax which is charged on corporate income out of which dividends are paid, but which does not appear as a direct deduction or withholding from the dividend itself.
For Und…
About Limited Liability Company: in most states, a form of organization that may be treated as a partnership for federal tax purposes and that has limited liability protection for the owners at the state level. Business form that combines the flexibility and tax advantages of a partnership with the …
Advance Ruling means:
An Advance Ruling is commonly defined as a “letter ruling, which is a written statement, issued to a taxpayer by the respective tax authorities (in the United States case, the U.S. Internal Revenue Service (IRS) Nation…
About Transportation Tax: Tax levied on transports (like vehicles, ships and aircraft) using public highways, rivers, and airports maintained by the government. For Transportation Fringe Benefit, see qualified transportation fringe….
About Constructive Ownership: For Constructive Ownership of Stock, see attribution rules.
A taxpayer may be considered to own property or stock which he only indirectly owns….
Arm's-length Transaction means:
a transaction among parties, each of whom acts in his or her own best interest. Transactions between the following parties would, in most cases, not be considered arm's length: a husband and wife, a father and son, a corporation and one of its subsidiaries. Former …
About Private Ruling : Tax (private) ruling granted by the tax authorities to a single taxpayer, usually with respect to a single transaction or series of transactions. Normally the ruling can be relied upon only by the taxpayer to whom it is issued, not by other taxpayers, and is binding upon the t…
Legal Entity means:
a person or organization that has the legal standing to enter into a contract and may be sued for failure to perform as agreed in the contract. Generally, corporations, joint-stock companies and limited liability companies are regarded for tax purposes as having an existence s…
About Foreign-source Income: gross income from sources outside the United States.
Generally income realized from countries outside the country of residence of the taxpayer….
Substantial Presence Test means:
a test to determine U.S. residency (in the United States, since the test is used to determine residence status, in other countries, based on the number of days, months, etc. of physical presence within a country. A resident alien is a U.S. resident for backup with…
About Minimum Tax: In certain countries or jurisdictions, companies or corporations are always liable to a certain amount of annual tax, regardless of whether they have realized a profit. See alternative minimum tax….
Creditor means:
a person (individual or entity) who has extended credit and to whom money is owed; a lender. Contrast debtor….
Dual Resident means:
a taxpayer who is a resident of two countries. Most U.S. tax treaties with other countries contain a “tiebreaker” provision that determines the country of residence of a person who is a resident of both countries.
About Turnover Tax: General term used to refer to the different forms of consumption and sales taxes. Turnover is the volume of business of an enterprise as set forth in the profit and loss account. It is usually measured by reference to the gross receipts, or gross amounts due, from the sale of goo…
Expatriate means:
a nonresident alien who lost U.S. citizenship within the 10-year period preceding the close of the tax year and had as one of his or her principal purposes the avoidance of taxes. Persons who have left their country and live abroad. The expatriate is still subject to U.S. taxati…
About Comparable Uncontrolled Price Method: Comparable Uncontrolled Price (CUP) Method is one of five methods for determining an arm's-length price for tangible property transfers. A transfer pricing method that compares the price for property or services transferred in a controlled transaction to t…
Global Hedging means:
a risk-management strategy to balance positions of different business units or with unrelated third parties. An exception to mark-to-market rules is provided for global hedging.
GLOBAL HEDGING – A risk-manag…
About Cash Basis: Cash Basis (cash Method) is the accounting method used by most individual taxpayers; also called the cash receipts and disbursements method. The cash method recognizes income and deductions when money is received or paid. Former IRC (check Categories , C Leave a comment
Conduit Approach means:
a method whereby income or deductions flow through to another entity (e.g., partnership income flows through to the partners). Also, a trust beneficiary must include in gross income the amount that the trust is allowed as a deduction for distributions.
About Comparable Profits Method: About COMPARABLE PROFIT METHOD (CPM), see comparable uncontrolled price method.
– Under US regulations CPM is a method to determine an arm's length consideration for transfers of intangible property. If the reported operating income of the te…
Avoidance of Tax means:
a method by which a taxpayer legally reduces his or her tax liability, for example, by investing in a tax shelter. Avoidance is a term that is difficult to define but which is generally used to describe the arrangement of a taxpayer's affairs that is intended to reduce his…
About Carryforward : Carryforward (or Carryover) is a process by which the deductions and credits of one taxable year that cannot be used to reduce tax liability in that year are applied against tax liability in subsequent years. Former IRC (check Categories , C Leave a comment
About Branch Profits Tax: A BPT is a tax of 30% of the dividend equivalent amount, imposed on foreign companies doing business in the United States. The dividend equivalent amount is the foreign corporation's effectively connected earnings and profits for the tax year, subject to certain adjustments…
About Partnerships.: A partnership's nonrecourse financing may increase a general or limited partner's (see Limited Partnership) amount at risk provided that the financing is qualified nonrecourse for both the partner and the partnership. However, the amount treated as at risk cannot be more than th…
Tax Haven means:
a jurisdiction that allows transactions to take place in conditions of extreme secrecy that may allow taxpayers to avoid taxation. Tax haven in the “classical” sense refers to a country which imposes a low or no tax, and is used by corporations to avoid tax which otherwise would …
PRO RATA RULE means, Under most VAT systems, a credit for part of the input tax is allowed for VAT previously paid on goods and services when they are used in taxable and exempt (without credit) transactions and total transactions occurring during a calendar year. See Categories , P Leave a comment
Centralized Management means:
a characteristic indicating that an organization may be taxed as a corporation. Day-to-day business operations are handled by appointed officers rather than the shareholders. Former Tax Regulation (check if this Reg. is…
.
….
Fruit and Tree Doctrine means:
a judicial doctrine that an individual who earns income from property or services may not assign such income to another person for tax purposes. For example, a mother may not assign her earnings from commissions to her daughter in order to avoid paying income taxes …
Allocation means:
the apportionment or assignment of income or expense (in relation to a taxpayer) for various tax purposes. For example, between permanent establishments in various jurisdictions, or income and expense items of a trust or estate are allocated between the corpus and income compone…
Company means:
a group of people organized to perform an activity, business, or industrial enterprise.
Often used to mean a separate legal entity (a corporation) organized to perform an activity, business or industrial enterprise…
Intangible Property means:
possessions that only represent value, such as stock certificates, bonds, promissory notes, and franchises, and lack intrinsic worth. See Section 197 Intangibles.
Property which has no physical existenc…