Tax Terminology Glossary
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- Accelerated Depreciation
- A method of depreciation
where a taxpayer can take
larger deductions in the
early years of an assets useful
life, rather than spreading it out evenly.
- The books, records, documents,
and effects used in preparing a tax
- Accounting Method
- The method used to report gross
sales, expenses, and
profits. The two methods
are cash basis and accrual
- Accrual Basis (Accounting
- An accounting method
whereby income and
expenses are accounted
for when earned rather than when cash is paid or received.
- To obtain a tangible or intangible thing.
- Acquisition Debt
- Debt used to acquire an asset,
usually used in context of real
- Active Income
- Income earned from activities in which a person materially
- Adjusted Basis
- The taxpayer’s basis that
is reduced from depreciation
and increased by expenses.
- Adjusted Gross Income
- A taxpayer's gross
income from all sources with certain deductions.
- Alimony is court ordered payments to a former spouse after separation
- Alternative Minimum
- An alternative tax that must
be calculated to ensure that high income taxpayers
who receive too many deductions
pay a minimum tax.
- Amended Tax Return
- A tax return that is filed with a taxing
authority after an original return
was filed, indicating some kind of change from the original filing.
- The process of deducting a portion of a capital
asset over its useful life. The amount deducted is reduced from
gross income allowing
a taxpayer to pay less
- Amount Realized
- The proceeds from a sale of an asset.
Income Installment Method
- A method used to calculate estimated
- For something to increase in its value.
- Arbitrage is where a trader
profits from the price differential
in two different markets
by purchasing an asset in
one market while selling it in another. If the two assets are different,
then one of the assets must entitle the taxpayer
to acquire the identical asset.
- Arms Length Transaction
- A transaction where
each party is independent and acts in his or hers own best interest.
- Where the IRS
makes an official determination that a tax
is due. For the IRS to make an assessment, many procedural rules must
- A tangible or intangible thing that can be used to create value.
- Assignment (Option)
- An option assignment occurs when a notice is sent to an option
writer informing them that the purchaser has exercised
their option and the seller
must now fulfill their obligation.
- Attribution Rules
- Tax rules that effectively impose ownership
of property to one party
even though the property is owned by another. These rules are sometimes
referred to as constructive
- Audit (Tax)
- A tax audit is where a government
reviews the books and records
of a taxpayer to ensure
compliance with the taxing
statutes. For more information please see our page on IRS
tax audit defense.
- This is where distant futures prices are less expensive than spot prices, or near term prices.
- Balance Sheet
- A statement of the financial position of an entity on a particular date in time. The statement will show owner's equity, assets, and liabilities.
- Balloon Payment
- A larger than usual payment that is typically made when a debt is redeemed.
- The purchase price of an asset including commissions and other expenses.
- Bearer Securities
- Securities where the holder can pass title with delivery, as there is no registration of who owns the asset. An example is the U.S. dollar or Federal Reserve note.
- Beneficial Owner
- A person who enjoys the benefits of property ownership, even though title may be in a different person’s name.
- A person who receives the benefits from certain acts. A beneficiary may be a person who receives benefits from a trust or insurance policy.
- Board of Equalization
- California State agency that administers sales and use, property, and special taxes.
- An interest bearing security where the holder is not entitled to an interest in the profits of the issuing entity.
- Book Value
- The value of an asset that
is carried on the balance
sheet of an entity, taking
depreciation into account.
- A cash payment made to equalize the value in a transaction, where two pieces of property are exchanged.
- The act of obtaining funds from a lender with the expectation that the funds will be returned, often with interest.
- A person who obtains funds from a lender on the condition that it is returned, usually with interest.
- Business Purpose
- A test used to check if the purpose of a transaction was for legitimate business purposes. This is an anti-abuse test because if the test discovers that there is no legitimate business purpose for a particular transaction, the transaction could be unwound for tax purposes.
- Cancellation of Debt
- The forgiveness of a debt without receiving full payment.
- Call Option
- A call option gives the holder the right, but not the obligation, to buy the underlying security at a predetermined priced, called the strike price, by a set date.
- Assets used for the future production by mixing with labor.
- Capital Asset
- For tax purposes, capital assets are all assets with certain exceptions, such as inventory, and real property used in a trade or business.
For more information please see our page on taxation of capital gains and losses.
- Capital Expenditure
- An expense incurred to acquire, or improve, a business asset that has a useful life extending beyond the tax year.
- To treat the cost and additions to property as a capital expenditure.
- Cash Settled Option
- A cash settled option is an option that settles in cash instead of an underlying security. The most typical example of a cash settled option is an index option.
- Carry Back
- An income tax deduction or credit that can be applied (or carried back) to a previous year’s tax return, resulting in a refund.
- Carry Forward
- An income tax deduction or credit that can be applied to future tax years.
- Cash Basis (Accounting Method)
- An accounting method where the income or expenses are accounted for when cash is paid or received, not when earned.
- A casualty is where a loss is realized from a fire, flood, hurricane, car accident, or similar event.
- Charitable Organization
- An organization that received a determination letter from a taxing authority that they are tax exempt.
- Clearing Corporation
- A clearing corporation becomes the buyer for every seller and seller for every buyer in an organized options market. A clearing corporation is designed to ensure standardized contracts and to remove default risk for the counterparties.
- Closing Transaction
- A closing transaction is the termination of the taxpayer's obligation under an option other than through the exercise or lapse of the option.
- A pledge of property to a creditor as security for a loan.
- Remuneration to a sales person for goods, services, or assets sold.
- Anything moveable that is bought and sold.
- Payment to a person for services performed.
- Stock options offered to employees as compensation, or partial compensation, for their services.
- An entity where income and deductions flow through to other parties, such as a partnership.
- Constructive Dividend
- A payment that although not expressed as a dividend, is treated as a dividend under the tax rules.
- Constructive Ownership
- Where ownership is effectively imposed upon another person for tax purposes. Also see attribution rules.
- Constructive Receipt
- Income is constructively received when it is credited to the taxpayer's account, set aside, or otherwise made available so that it may be drawn upon.
- This is where a futures contract is more expensive than the spot price, usually because of the cost of storing the underlying commodity. This is the opposite of backwardation.
- The ability of one person to compel another person to act according to their demands.
- A corporation that is organized in one jurisdiction, but controlled by shareholders in a different jurisdiction.
- Corporate Veil
- The legal protection insulating shareholders of a corporation, from the liabilities of the corporation.
- An entity that is sanctioned by government and is separate from its owners.
- Cost Basis
- The purchase price paid for property.
- Cost of Goods Sold
- A dollar amount associated with the cost of purchasing raw material and producing a finished product.
- The different parties on the different sides of a trade or transaction.
- Covered Call
- A position where a taxpayer owns the underlying security and has sold an equivalent amount of call options.
- Credit (Tax)
- An amount owing from a taxing authority to a taxpayer.
- A person who loaned property and is owed something in return.
- A store of value that is used as a medium of exchange in a given society.
- An interest bearing certificate or instrument that is unsecured by collateral.
- An amount owing.
- Debt Instrument
- A document that evidences a debt,
such as a bond, or debenture.
- A person who is a borrower, or owes money to a creditor.
- A person who is no longer alive.
- An item that reduces taxable income.
- Deep in the Money
- A deep in the money call option is where the strike price of the option is well below the current price of the underlying security.
- Deep in the Money
- A deep in the money put option is where the strike price of the option is well above the current price of the underlying security.
- The failure of a debtor to pay interest and principal as it becomes due.
- Default Risk
- The risk that a borrower, or counter party on a derivative security will default.
- Deferred Compensation
- A payment, or payments, made to an employee to compensate them for services rendered after income was earned.
- The excess of a correct tax liability over the amount that has been credited to the taxpayer.
- Deficiency Procedures
- Procedures that the IRS must generally follow before they can assess a tax, or an addition to tax. Deficiency procedures require that the IRS issue the taxpayer a notice of deficiency (ticket to tax court) and allow the taxpayer to petition the tax court for a re-determination before the IRS can assess the tax.
Benefits Pension Plan
- A pension plan where an employer
promises that upon retirement an employee
will receive monthly payments based upon a formula of earnings history,
tenure of service, and age.
Contributions Pension Plan
- A pension plan where the contributions of both the employer and employee are invested to provide the employee with a pool of funds from which to retire. There is no guarantee of future benefits, as that depends on investment returns.
- Tax that is due, but not yet paid.
- De minimis
- An amount that is so small it is not material.
- A person who relies on another for support, usually financial support.
- A term used to spread the cost of an asset over the term of years, or its useful life.
- A financial instrument that is intangible and based upon another asset.
- The amount by which a debt instrument is trading below its face value.
- To transfer property to another, or to discard it.
- The delivery of things to its intended recipients.
- A payment made from a corporation to its shareholders.
- Double Taxation
- The imposition of two or more taxes, on the same income.
Connected Income (ECI)
- Income that is effectively connected to a trade or business that is within the United States.
- A worker who performs a job while being controlled by their employer.
- A person or entity who hires an employee or independent contractor to perform services.
Identification Number (EIN)
- A number assigned to a business by the IRS.
- Employee Stock Option
- An option received by an employee to purchase shares of the company he works for.
- An organization that is considered separate from its owners and can operate on its own behalf. Examples are corporations, partnerships, estates, and trusts.
- Equitable Interest
- The equitable interest is the interest of the beneficial owner. This may be a different person than the legal owner.
- An estate is the total worth of a person at any point in time.
- Estimated Tax Payments
- These are payments made to the IRS throughout the tax year that are an estimate of taxes due. These payments are credits that will be refunded if there was an overpayment.
For more information please see our page on the estimated tax penalty.
- Excise Tax
- A tax imposed on a good or service, often related to the quantity rather than the value.
- A person named in a will to fulfill the decedent's wishes.
- Exemptions (Tax)
- A taxable event on which no tax is levied, due to an exception from the tax rules.
- Exercise (Option)
- An options exercise is where an option holder implements his/her right under an option and buys or sells the underlying security at the strike price.
- A person who has left their native country to live abroad.
- An outflow of money that is paid to another person or entity and is currently deductible because it is not being used for the acquisition or improvement of a capital asset.
- Expires (Option)
- The date on which an option no longer trades and is either exercised or lapses.
- Extraordinary Dividend
- A one-time distribution made by a corporation to its shareholders, which is usually cash, but sometimes other property or stock.
- Face Value
- The value at which a debt instrument will mature.
- Fair Market Value (FMV)
- The price at which willing buyers and sellers would be ready, willing, and able to sell or buy an asset, good, or service.
- A person or entity holding an asset in trust for a beneficiary; or one who owes another the highest duty of care, good faith, trust, confidence, and candor.
- Field Audit
- An examination of the taxpayer's books and records at the taxpayer’s place of business.
- Financial Instrument
- A physical or electronic document that holds monetary value. Examples include currencies, stocks, bonds, debentures, and derivatives.
- First in First Out: FIFO
- Older items, those that were acquired first, are assumed to be sold first.
- Fiscal Policy
- Government policy that attempts to change the behavior of its subjects through spending programs and tax laws.
- Fiscal Year (Tax Year)
- An accounting period of any twelve consecutive months.
- Foreign Sourced
- Income that is earned outside the taxpayer's country of residence.
- Foreign Tax Credit
- A credit provided to a taxpayer for taxes paid to a foreign jurisdiction.
- Form (Tax)
- A special form designed for taxpayers to report their financial dealings for the year. An example would be Form 1040.
- Forward Contract
- A contract executed over the counter where the buyer receives the obligation to buy and the seller the obligation to sell an underlying instrument at a predetermined price in the future. There are no mechanisms for early termination of a forward contract nor are there any mark to market rules.
- Futures Contract
- A contract executed on an organized exchange where the buyer receives the obligation to buy and seller the obligation to sell an underlying instrument at a predetermined price in the future.
- Frivolous Position
- A position advanced by a taxpayer that they know is invalid and therefore presented for improper purposes.
- Frivolous Return
- A frivolous return is a tax return designed to fail in providing the IRS with enough information to assess the correct amount of tax.
- Generally accepted accounting principles
- The amount by where the selling price of an asset exceeds its basis.
- A court ordering a third party (often an employer) who holds money for a creditor (often an employee), to pay the money to the person obtaining the garnishment order.
- General Partner
- A partner in a partnership whose liability is not limited.
- Generation Skipping
- A tax imposed to prevent skipping the imposition of gift and inheritance taxes.
- Gift Causa Mortis
- The gratuitous transfer of property to a person by another who is essentially on their death bed.
- Gift Inter Vivos
- The gratuitous transfer of property to a person by another during their life.
- Gift Tax
- A tax imposed on the transfer of a gift during the life of the giver.
- Going Concern
- A business that is currently in operation without the threat of liquidation.
- Good Faith
- Having honest intentions
- The intangible asset value of the reputation of a business.
- A political institution that decides, regulates, controls, and enforces public policy.
- Grandfather Clause
- An exemption that allows old rules to apply to specific situations after the adoption of new legislation.
- Gross Income
- The total amount included in income before any deductions, specifically tax deductions.
- Gross Sales
- The amount received from goods and services sold over a certain time period.
- A legal contract promising that the debt of another will be paid.
- A person who guarantees another person’s liability.
- Hedging Transaction
- A transaction that limits investment risk, generally through the use of derivative securities, such as options, futures, and forwards.
- Holding company
- A company whose main purpose is to hold shares of other companies.
- Holding Period
- The length of time that an investment is held.
- House Ways
and Means Committee
- The committee in the U.S. House of Representatives that introduces most new tax legislation.
- Imputed Interest
- Interest that for tax purposes the IRS considers to have been paid, even though none was.
- Income Splitting
- A tax strategy that is used by a family to move income from a person in a higher tax bracket to a different member of the family who is in a lower tax bracket.
- Income Tax
- A tax levied on money earned, whether through wages or business profits.
- Independent Contractor
- A person or entity that provides goods or services to another who does not control them.
- A person who is hired as an independent contractor and is not controlled by the person who hired him. The line between an independent contractor and an employee can sometimes be blurred.
- Index Option
- A call or put based on an index.
- Austrian economists define inflation as an increase in the money supply. Keynesian economist believe inflation is properly defined as an increase in price levels.
For more information please see lawsofinflation.info.
- Information Return
- A tax return that provides information to a taxing authority, but does not compute the tax liability.
- Inheritance Tax (Estate
- A tax imposed on the transfer of an estate upon the death of a person.
- In Kind
- A distribution or payment in other than currency.
- The price paid for borrowing currency, usually expressed as a percentage of what was borrowed.
- Internal Revenue
- A weekly publication produced by the IRS summarizing recent administrative rulings.
- Internal Revenue
- The body of laws that governs taxation in the United States.
- Internal Revenue
- The government institution that enforces and collects tax.
- Goods and materials held in stock for a business. For securities dealers, their inventory may include stock commodities, futures, forwards, options, or other assets.
- A person or entity that makes an investment.
- Laying out money or capital with the expectation of profits.
- Investment Income
- Income earned from passive investments
- Interest that is paid for the production of investment income, such as interest paid on a margin loan.
- A corporation or government that sells its own securities to investors.
- Itemized Deductions
- Eligible expenses that individuals can report on their tax return to reduce their tax liability.
- Jeopardy Assessment
- A tax assessment that has been made by a taxing authority without going through normal procedures because the amount owed is likely in jeopardy of being removed from the Country.
- Joint Return
- A single tax return made together by husband and wife.
- Kiddie Tax
- A term used to describe the tax imposed on unearned income of a child under the age of 14.
- Lapse (Option)
- When an option expires valueless.
- Last in First Out (LIFO)
- New items, those that were acquired last, are assumed to be sold first.
- A law enacted by government.
- A person who provides funds to a borrower on the condition that they are returned, usually with interest.
- To collect or carry away.
- The obligation to pay money or property to another.
- London Interbank Offering Rate
- A charge against property, making it collateral or security for payment against a debt.
- Limited Liability
- A business entity that can enjoy the tax benefits of being a conduit and also the protections of a corporation.
- Limited Partner
- A partner in a partnership who is not active and has limited liability.
- Listed Company
- A company whose shares are listed on an organized stock exchange.
- A company that is being liquidated is a company that is in the process of being dissolved or wound-up.
- Long Position
- A long position is where the holder of a security owns the property and will profit if the property appreciates in price.
- Long Term Capital
- A long term capital gain is where an investment property has been held by a taxpayer for more than a year and when sold the amount realized was greater than the taxpayer's basis.
Term Equity AnticiPation Securities (LEAPS)
- LEAPS are the same as options, except that options normally have an expiry date of 9 months or less, whereas LEAPS have expiry dates exceeding 9 month and can sometimes be 2 years or more.
- Loss Sale
- A loss sale is where a taxpayer sells an asset for less than his adjusted basis.
- Margin Account
- An account with a securities broker where they extend credit using securities as collateral.
- Margin Loan
- A loan from a stock broker to an investor using securities as collateral.
- Marginal Tax Rate
- The percentage of tax paid on the next dollar earned.
- A place where goods, services, or assets are exchanged.
- Mark to Market
- The process of adjusting the value of an asset to its value in the market.
- Market Maker
- A person or company that commits to constantly post bid and offer prices for financial instruments to facilitate a liquid market.
- Married Put
- A married put is where a person purchases the underlying security and a put option on the same date with the intention of selling the underlying security through the put if the price goes down.
- In law, something is material if it is directly relevant to a matter.
- Maturity Amount
- The amount that will be received when a debt is redeemed.
- The amalgamation of two or more business ventures.
- Mixed Straddle
- A mixed straddle under IRC section 1256 means a straddle where at least one of the positions in the straddle is a 1256 contract and each position is clearly identified before the close of the day that the first 1256 contract is acquired
- A lien on real property to collateralize a debt.
- Mortgage Interest
- Interest paid on a mortgage. All, or a portion, of the amount of interest paid for a mortgage may be deductible.
- Naked Option
- A naked option is where a call or put is sold without an offsetting position in the spot market.
- Net Income
- Gross income minus certain expenses.
- Net Operating Loss
- The amount by which business expenses exceed income in a tax year.
- Net Worth
- Net worth is assets minus liabilities.
- Non Recourse Debt
- A debt for which an individual has no personal liability.
- Notice of Deficiency
- A notice of deficiency is a letter sent by the IRS to the taxpayer informing them that they have 90 days (150 in limited circumstances) to petition the tax court for a re-determination of the IRS's assertion.
- Offers in Compromise
- An agreement between the IRS and a taxpayer where less than the full amount of tax liability is accepted by the IRS in satisfaction of the full amount due.
For more information please see our page on Offers in Compromise.
- Opening Transaction
- Where a taxpayer writes or buys an option making an original trade as they do not currently hold the opposite position in their account.
- An option is a legal contract where a person agrees to sell, or purchase from the holder, specific property at a predetermined price and time if the holder so chooses to exercise the option.
- Option Premium
- The amount the buyer pays, and the seller receives, for an option.
- Option Writer
- A person who sells an option without owning that option.
- Original Issue
- A discount from face value at the time the financial instrument is issued.
- An amount paid to a taxing authority in excess of what was due.
For more information please see our page on IRS overpayment interest.
- Owner's Equity
- The difference between total assets and total liabilities.
- Having exclusive rights or control over property.
- A member of a partnership.
- An association of two or more persons formed for the purposes of making a profit.
- Passive Investment
- An investment where the investor does not materially participate.
- Pass Through Entity
- A non-taxable entity such as a partnership.
in Lieu of Dividends
- A payment in lieu of a dividend is where a short seller makes a payment to the lender of securities to compensate for dividends or other distributions from the short property.
- See tax penalty.
- Piercing the
- Where a court abandons the corporate shield and holds the shareholders personally liable for corporate liabilities.
- Portfolio Interest
- Interest that may be paid from U.S. sources that is free from withholding tax requirements.
- Preferred Shares
- A preferred share is an equity security where the holder has priority over dividends in bankruptcy, but usually has no voting rights. Sometimes if a required dividend is not paid the holder will gain the right to vote.
- In the context of options, it is the amount that the purchaser of an option paid for it. In the context of a bond, it is the amount paid above the face amount.
- The original amount of a debt.
Place of Business
- Where business is usually conducted.
- Private Letter Ruling
- A written decision about the tax
treatment of a transaction
that is issued by a taxing
authority at the bequest of a taxpayer.
This ruling is not precedent and therefore is not binding on other
taxpayers. For more information please see our page on private
letter ruling requests.
- The difference between the amount of revenue and the expenses associated with obtaining that revenue in a given time period.
- Something that is owned by a person, entity, or government.
- A proxy is a document a shareholder provides to another authorizing them to vote their shares during a corporate meeting.
- Put Option
- A put option gives the holder the right, but not the obligation, to sell the underlying security at a predetermined priced, called the strike price, by a set date.
- On an organized stock exchange a quote is the transmission of price information.
- Rabbi trust
- A nonqualified trust used to defer income for an employee.
- Real Property
- Land and fixtures attached to the land.
- Reasonable Cause
- Reasonable cause is where a taxpayer can demonstrate that they acted with ordinary business care and prudence.
For more information please see our page on reasons for IRS penalty abatement.
- Recognition Event
- A point in time when income must be recognized and reported to the IRS.
- A collection of data or information.
- The repayment of a principal amount of debt, at or before maturity.
- Refund (Tax)
- Tax credits that are paid from a taxing authority to a taxpayer.
- REMIC is short for Real Estate Mortgage Investment Conduit. This is a special purpose vehicle used for pooling mortgages and issuing the pool as a security.
- Compensation to an employee for their services.
- Retained Earnings
- The portion of a businesses’ profits
that are retained by the corporation
rather than distributed to its shareholders.
- Revenue is income received from normal activities before expenses.
- Revocable Trust
- A trust that is subject to amendment or revocation by the settlor.
- Payments made to a taxpayer for the right to use their intellectual property.
- Safe Harbor
- Transactions falling within a safe harbor will be accepted by a taxing authority without further question.
- Sales Tax
- A tax levied on the retail sale of an item imposed by a State.
- S Corporation
- A corporation that has made an election under subchapter S of the Internal Revenue Code to be treated as a conduit entity.
- Secret Tax
- A tax paid by a consumer without his knowledge.
- Certificates evidencing an interest in a corporation, or evidence of indebtedness by a corporation, person, or government.
- Securities Dealer
- Individuals or firms that engage in trading as their profession and trade for their own account.
- Self Assessment
- This is where a taxpayer files a tax return declaring, or assessing, their own tax liability.
- Settlement Date
- The date on which a taxpayer must pay, or receive money, for a trade that they previously executed. Typically the settlement date for stocks is trade date plus 3, whereas options are trade date plus 1.
- A person who establishes a trust by funding it with property for a beneficiary.
- Severance Payments
- Payments made as a result of a termination of a position of office, or employment.
- Sham Transaction
- A transaction made with no legitimate business purpose, as it fails the business purpose test.
- A person or entity that holds shares in a corporation.
- Shareholders' Equity
- Assets minus liabilities of a corporation.
- A unit to account for a piece of ownership in a corporation.
- Short Position
- A short position is where a person borrows a security and sells it on the market and will eventually buy it back to repay the lender. A person who is in a short position profits if the price goes down as when they purchase the security to repay the lender they collect the difference in the selling price and the purchase price.
- Short Sale
- A Short sale occurs when a taxpayer borrows a stock or security from a lender and sells it to a third party with the idea of buying the stock or security back later to return it to the lender.
- Short Sale
against the Box
- A short sale against the box occurs when a taxpayer who owns property sells identical property by borrowing it instead of using his own property.
- Short Tax Year
- A taxpayer whose fiscal year is less than 12 months. This will occur because it's the taxpayer's first or final return.
- Short Term Capital
- A short term capital gain is where an investment property was sold before being held for a year and the amount realized is greater than the taxpayer's basis.
- The jurisdiction that a piece of property is treated as being located in for tax purposes.
- Social Security
- A number that U.S. workers receive from the Social Security Administration that must be provided to employers.
- Sole Proprietorship
- A business entity where there is only one owner and he/she is liable for the business debts.
- Spot Price
- The current price of a commodity on the market.
- Standard Deduction
- A fixed amount taxpayers are allowed to deduct from their AGI if they choose not to take the itemized deduction.
- Stepped-up Basis
- The basis of a decedent's estate is stepped-up to the value on the date of death, or 9 months later.
- Generally the term means any share or certificate representing ownership in a corporation.
- Stock Option
- The right, but not the obligation, to buy or sell stock.
- A straddle is the simultaneously written combination of calls and puts on the same number of shares, of the same underlying security, at the same strike price, for the same time frame.
For more information please see our page on tax straddle rules.
- Straight Line
- A method of depreciation that allows for equal amortization over the useful life of an asset.
- Strike Price
- The predetermined price at which the underlying financial instrument will be bought or sold with an options contract.
- Strip Bond
- A bond that has had all the coupons stripped off of it by market participants and not the issuer.
- Subpart F
- The part of the U.S. tax code that taxes shareholders of controlled foreign corporations in order to prevent the tax free accumulation of earnings outside the United States.
- Successor Position
- Any position that at any point in time was a replacement for a second position and the second position was offsetting to any realized loss.
Similar or Related Property
- Property is substantially similar or related when the fair market value of the two instruments are reasonably expected to move directly or inversely with each other and the property reflects the same economic factors.
- Superseding Return
- A tax return that is filed subsequently to the original return and filed within the filing period (including extensions).
- A financial derivative where two parties exchange payments based upon a notional principal amount.
- Property taken away from a taxpayer to support a government.
- Taxable Event
- An occurrence that affects a person’s tax liability.
- Taxable Income
- Income that is subject to taxation under law.
- Tax Bracket
- A range of income levels subject to a marginal tax rate.
- Tax Court
- A court authorized by Congress to determine disputes about tax, penalties, interest, transferee liability, partnership items, and other litigation costs.
For more information please see our page on tax court representation.
- Tax Exempt
- Something that is not taxed.
- Tax Exempt Organization
- An organization that is tax exempt.
- Tax Gap
- The difference between what taxpayers owe and what taxpayers voluntarily pay.
- Taxing Authority
- A tax authority is a government institution charged with the responsibility of collecting tax.
- Taxing Statutes (Tax Laws)
- A body of laws requiring the payment of tax.
- Tax Liability (Tax)
- The amount of tax due.
- A taxpayer is a person, partnership, corporation, trust, or estate that is required under the law to file a tax return. A taxpayer is not necessarily somebody who makes tax payments or owes a tax debt.
- Taxpayer Advocate
- An office within the IRS designed to assist taxpayers who are having trouble in their dealings with the IRS.
- Tax Penalty
- An addition to tax imposed by a taxing authority on a taxpayer for violating the taxing statutes.
For more information please see our page on the introduction to IRS penalty relief.
- Tax Planning
- An arrangement of a person’s financial affairs in order to minimize their overall tax burden.
- Tax Return
- A report provided to a taxing authority containing information used to calculate income, or other taxes.
- Tax Shelter
- A legal structure that reduces the tax
liability for an entity
- Tax Treaty
- An agreement between two or more countries regarding the taxation of their subjects, designed to avoid double taxation. A treaty can be referred to as a convention, treaty, or agreement.
- Trade Date
- The date on which a taxpayer executes a trade and contracts to buy or sell a security.
- Trade or Business
- A regular and continuous activity taken-up for profits.
- Someone who buys and sells financial instruments, such as stocks, bonds, commodities, and derivatives.
- The active buying and selling of financial instruments.
- A deal or exchange of ideas, currency, commodities, goods, or assets.
- Transfer Pricing
- The price that is used on the books of an organization when transferring products, services, or goods from one part of the organization to another.
- A trust is a legal document where a settlor transfers property into the name of the trustee who cares for that property pursuant to the settlor’s instructions for the benefit of the beneficiaries.
- A person who receives property and must act as a fiduciary to care for that property for the benefit of a beneficiary.
- A payment that is less than the amount required, or due.
For more information please see our page on underpayment interest.
- Undue Hardship
- This is a legal term that is difficult to define; but in general it is a substantial economic loss that would result from the payment of a tax or tax penalty.
- Unimproved Property
- Land that has not yet been developed.
- Unrecognized Gain
- The amount of gain that would be recognized if an asset were sold.
- Unrelated Business
- A trade or business that is regularly carried on and unrelated to the tax exempt purpose of a tax exempt organization.
- Useful Life
- The period of time one expects a depreciating asset to be useful for.
- Use Tax
- A tax levied upon the use of a good and sometimes services. It is usually only imposed when sales tax was not paid.
- The measure of the worth of an asset or good.
- Voluntary Compliance
- In general a taxpayer voluntarily complied with the tax code when they prepared an accurate return, timely filed it, and paid any tax that was due.
- Voting Stock
- Corporate stock that entitles the holder to vote or issue a proxy.
- Compensation a worker receives for their labor.
- A warrant is an option where the grantor (the corporation on whose stock the option is based) is the issuer.
- Wash Sale
- A Wash Sale is where a taxpayer sells securities at a loss, and within a set time frame purchases the same or equivalent securities thereby recognizing the loss for tax purposes, but engaging in no meaningful economic transaction.
For more information please see our page on the wash sale rule.
- Withholding Tax
- A withholding tax is where the source of income must withhold some of the distribution and remit it to the government, where it is credited to the taxpayer's account. If the taxpayer's tax liability is less than the amount withheld a refund will be provided.
Published - June 2011
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