Principal Residence means:
the place where a person lives most of the time. A principal residence may be a single-family house, condominium, trailer, or houseboat. To defer capital gains taxes on the profit from a home sold, it must be replaced by another home purchased at a price equal […]
Short Form means:
any of certain federal income tax forms, such as Former Federal Tax Form (check here if the Form is current) 1040A and Former Federal Tax Form (check here if the Form is current) 1120A, that provide less detailed reporting for taxpayers meeting the filing requirements […]
Capital Gain means:
the gain on the sale of a capital asset. A tax on profits from the sale of securities or other assets. In 1994, the maximum individual tax rate on long-term capital gains is 28%. There are limits on the deduction of capital losses against ordinary income, with none […]
Penalty means:
the money or other cost one person pays for breaking a tax law or violating part or all of the terms of a contract. The General Laws of some States (like Massachusetts) provide for the imposition of penalties when taxpayers fail to comply with those States' tax laws. […]
Burden of Proof means:
the duty of a plaintiff, at the beginning of a tax trial, to make a prima facie showing of each fact necessary to establish the existence of a cause of action. In general, the burden of proof is on the taxpayer in a civil tax case and on the U.S. Internal Revenue […]
Cash Flow means:
the amount of money available to a business or investor after all periodic cash payments have been deducted from cash income. Cash flow is not the same as taxable income. Some items subtracted from cash flow to derive taxable income are money received from loans, […]
Current Liabilities means:
the debts incurred by the reporting entity as part of normal operations and expected to be repaid during the following 12 months. Examples are accounts payable, short-term loans, and the portion of long-term loans that is due in 1 year. Description and […]
Holding Period means:
the length of time that an investment is owned or expected to be owned. The holding period is important in determining whether a gain or loss from the sale or exchange of a capital asset is long-term or short-term. For tax purposes, the holding period generally […]
Social Security Tax means:
the old-age, survivors, and disability (OASDI) portion of the tax assessed on compensation and self-employment earnings under the Federal Insurance Contributions Act. Social Security tax is an amount paid by individuals during the period in which they earn wages […]
Interest means:
money paid for the use of money (often though of as rent paid for the use of money). The charge for the use of borrowed money. See home mortgage interest; imputed interest; interest deductions; interest income; personal interest expense. Description and Definition of […]
Personal Property means:
things movable, as distinguished from real property, or things attached to the realty; also called personalty. Anything that is not real property is personal property. The main characteristic of personal property is that it is movable without causing damage to […]
Portfolio Income means:
income that includes interest, dividends, royalties, and gains and losses from investments, but not passive activity investments. The concept, introduced by the Tax Reform Act of 1986, distinguishes passive, active, and portfolio income. Passive losses generally […]
Condemnation means:
taking private property for public use with compensation to the owner. Condemnation is used by governments to acquire land for streets, parks, schools, and so on, and by utilities to acquire necessary property. Replacement of the asset with another of equal value […]
Estate Tax means: the amount due to the government, generally based on the fair market value of one's property at death, less liabilities. The federal estate tax and gift tax have been unified, and one unified credit applies to the sum of the property given during one's lifetime and remaining […]
Income means: economic benefit; money or value received. Former IRC (check if this IRC provision is current here) §61. Code Sections about Income Sec. 61. Gross income defined Sec. 62. Adjusted gross income defined Sec. 63. Taxable income defined Sec. 64. Ordinary income […]
Disaster Loss means:
the loss from a disaster in an area declared by the President as warranting federal assistance. A taxpayer may elect to claim a casualty loss on the tax return for the previous year anytime on or before the later of (1) the due date of the tax return for the year of […]
Placed In Service Placed In Service means:
ready for use. A depreciable asset is deemed to be placed in service when it is first placed in a condition or state of readiness and availability for a specifically assigned function; this date fixes the beginning of the depreciation period. […]
Backup Withholding means:
the procedure used to ensure that federal income tax is paid on earnings even though the recipient cannot be identified by a Social Security number. Banks, brokers, and other entities report nonwage earnings paid out on U.S. Internal Revenue Service (IRS) Former […]
Personal Exemption means, in determining taxable income, an individual exemption for which a taxpayer is entitled to a deduction. Can be claimed for the taxpayer and spouse. Each personal exemption reduces the income subject to tax by the exemption amount. A separate personal exemption is […]
Social Security Benefits means:
the amounts paid monthly by the Social Security Administration to qualified recipients. Social Security benefits are made available to retired workers, their spouses and their dependents as well as to disabled workers, their spouses and their dependents. A […]
Estate means:
broadly, all that a person owns, whether real property or personal property; for instance, the estate one leaves at death. See also other Tax Terms and Definitions in U.S.A. probate estate; taxable estate. For ESTATE DUTY/TAX, see Death duties. See Inheritance Tax and […]
Annual Exclusion means:
the amount, up to $10,000 per donee per year, that a donor may exclude from the gift tax. Former IRC (check if this IRC provision is current here) §2503(b). Gift Tax Annual Exclusion Issue You may find information about Gift Tax Annual Exclusion in this Tax […]
The Child Support are. payment specifically designated for the purpose of child support (or treated as such) under a divorce or separation agreement. Such payments are neither deductible by the payer nor taxable to the payee. Contrast with alimony. Former IRC (check if this IRC provision is […]
Income In Respect of A Decedent Income In Respect of A Decedent means:
Income In Respect Of A Decedent (IRD) is an amount that a decedent was entitled to receive as gross income but that, because of his or her method of accounting, was not includable in gross income for any period before […]
The Credits are. under the Social Security Act, the determiners of eligibility for Social Security programs. A person earns credits by working in a job covered by Social Security and by paying Social Security taxes. In 1991, one credit was earned for each $540 in Social Security earnings. A maximum …
Section 179 means:
the part of the Internal Revenue Code that allows immediate expensing, up to $17,500 per year, of tangible depreciable property in the year that it was placed in service. The amount allowed as a deduction is limited to the aggregate amount of the taxpayer's taxable income for t…
Military Personnel means:
persons serving in the U.S. armed forces; they receive a number of benefits such as housing and cost-of-living allowances and tax-free pay during combat zone service….
Prime Issues means:
major tax controversies that will not be conceded or settled by the Audit Division of the U.S. Internal Revenue Service. The U.S. Internal Revenue Service (IRS) publishes a list of prime issues, and cases involving t…
Termite Damage means:
insect damage that does not qualify as a casualty loss because the damage is not sudden and unexpected….
Foreign Income means:
income from sources outside the United States. See blocked income; foreign earned income exclusion; foreign investment company; passive foreign investment company….
Educational Assistance Program means:
employer-provided reimbursement to employees for tuition, fees, books, and supplies. Up to $5,250 per year received by an employee under such a program before January 1, 1995, may be excluded from gross income. Any amount in excess of $5,250 is includable in …
Cert. Den. means:
certiorari denied. Denial of an appeal from a U.S. Court of Appeals to the U.S. Supreme Court. The Supreme Court is not compelled to hear an appeal from a lower court and may choose not to do so….
Consumer Products means:
any tangible personal property normally used for personal, family, or household purposes. Former U.S. Treasury Department Proposed Regulation (check if this Prop. Reg. is current here) §31-3508-l(g)(3)….
Nominee means:
any payee who is not the actual owner of a dividend or interest payment, but would be required to furnish his or her identifying number to the payor. Any person who receives dividend or interest payments as a nominee and who makes payments of the dividends or interest totaling $10 …
Contingent Liability means:
pending lawsuits, judgments under appeal, disputed claims, and the like, representing financial liability in the event of an adverse outcome, which are not deductible….
Equipment means:
machines or major tools necessary to complete a given task. The major tools a mechanic needs to repair a machine are an example. Equipment must be capitalized and written off over the appropriate recovery period. For example, most equipment may be written off over 7 years using t…
Qualified Temporary Investment Income means:
income attributable to stock or a debt instrument, attributable to the temporary investment of new capital, and received or accrued during a 1 year period beginning on the date on which a real estate investment trust receives such capital. Former IRC (…
Split-off means:
either of two types of tax-free corporate reorganizations instrument or action: 1. Under a Type No. 1 exchange, a corporation transfers part of its assets to a new corpo-ration in exchange for stock of the new corporation. The original corporation then distributes the same stock …
Education Savings Bond means:
certain U.S. government bonds issued after 1989 (e.g., Series EE bonds) and used by an individual to pay qualified higher education expenses. Income from these bonds may be excluded from taxable income, using Form 8815. This valuable exclusion is subject to a phase-o…
Prevailing Party means:
any party (other than the United States or a creditor of a taxpayer) that substantially prevails with respect to the amount in controversy or the most significant issue(s) in a civil tax case. Former IRC (check if …
Supporting Schedules means:
pages attached to a tax return by a taxpayer, typically when the U.S. Internal Revenue Service (IRS) Form (see if this Form is current here) …
Loss Disallowance Rule means:
loss is disallowed on certain transactions between related parties….
Reversed means:
indicating that a decision of one court has been overturned by a higher court….
Oil Import Fees means:
import fees on crude oil and petroleum products, intended to limit petroleum imports of these products….
Livestock means:
cattle, horses, and other farm animals, except poultry, fish, frogs, or birds. Former Tax Regulation (check if this Reg. is current here) §1.1231-2(a)(3). Under certain conditions, livestock can be classified as Section 1231 as…
Tenancy In Common means:
ownership of realty by two or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the decedent is inherited by the party or parties designated in the decedent's will. See also…
Transferee Liability means:
liability that is covered by state laws dealing with creditors' rights and by federal laws ensuring priority of payments for federal claims in insolvency situations. Former IRC (check if this IRC provision is c…
Investment Indebtedness means:
indebtedness incurred to carry or purchase investments in assets that produce portfolio income. Limitations are placed on deductions for investment interest expense incurred with respect to the debt. The following do not result from investment indebtedness: • i…
Excess Distribution means:
either (1) the excess of current distributions over a base equal to 150% of the prior 3 years' average distributions, or (2) 10% of the value of a corporation's stock at the beginning of the year. A loss carryback limitation is triggered by an excess distribution. Forme…