Tax Glossary

One of four quarters of a calendar year: January through March, April through June, July through September, or October through December.

The right to buy a state number of shares of stock at a predetermined price (the strike price) before a specified date.

Generally, everything an individual owns and uses for personal purposes, pleasure, or investment.

Amounts paid to an individual or credited to their account by regulated investment companies and real estate investment trusts (REITs). These amounts are also known as capital gain dividends.

To recover a cost over a period of years through deductions for depreciation, amortization, or depletion, and adding the cost to the basis of the property to which it relates.

The unpaid interest on a loan that the lender adds to the outstanding principal balance of the loan.

Any option that, upon exercise, is settled by paying the owner of the option cash or other property and not the actual property underlying the option.

Generally, wages paid by cash, checks, money orders, or equivalent means. Cash wages do not include the value of food, lodging, clothing, or other such noncash items given to an employee.

The damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.

A donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting anything of equal value.

A natural child, stepchild, adopted child, or an eligible foster child.

A payment that is specifically designated as child support or treated as specifically designated as child support under a divorce or separation instrument.

An individual who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: (1)an individual who is unable, for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual due to loss of functional capacity (activities of daily living are eating, toileting, transferring, bathing, dressing, and continence), or (2) an individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

An employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer Social Security and Medicare taxes.

Annuity benefits that are paid primarily under the Civil Service Retirement System or the Federal Employees Retirement System.

The number of years that establishes the property class and the recovery period for most types of property for the General Depreciation System and the Alternative Depreciation System under the Modified Accelerated Cost Recovery System.

Generally, a corporation that, at any time during the last half of the tax year, has more than 50% in value of its outstanding stock directly or indirectly owned by five or fewer people. This type of corporation is generally not a personal service corporation.

Individuals living together in an intimate relationship when not legally married.

Two or more loans made to the same borrower that are treated by both the lender and the borrower as one loan.

Any work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage.

Any area the president of the United States designates by Executive Order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order.

A type of share in the ownership of a company that usually provides the right to vote on decisions relating to the company's management. Shareholders are entitled to receive distributions of the company's profit in the form of dividends.

An individual who performs services for an employer in return for compensation. An employee is subject to the control of the employer regarding what work is done and how, when, and where it is done.

A marriage in which a man and woman are considered to be married even without a license or a formal ceremony. Only certain states recognize common-law marriages.

Income earned while married and domiciled in a community property state that is allocated to both spouses, regardless of which spouse actually earned it.

Laws that affect what income is reported on the federal income tax returns of married taxpayers who live in a community property state and file separate returns.

Travel between a personal home and work or job site within the area of an individual's tax home.

Money or other benefits given or received as payment for work or service. Compensation can include wages, salaries, bonuses, prizes, and tips an employee receives.

The process by which private property owned by a taxpayer is legally taken for public use without their consent.

An IRA account used as a holding account for eligible rollover distributions from an employer plan that can be rolled over to a new employer plan later.

A written agreement between a taxpayer and the IRS that extends the statutory period of limitations (which is usually three years) to allow additional time, when it is necessary, to fairly resolve a tax examination. These agreements are called "consents" and apply to all kinds of taxes except estate tax.

Loans used to refinance more than one loan of the same borrower.

The unqualified, vested right to receive immediate income or property. The right may be credited to an account, set apart, or otherwise made available so that it may be drawn upon at any time.

The selling price plus mortgages, debts, and other liabilities assumed or taken by the buyer that are in excess of the seller's adjusted basis. This amount is the total of all principal payments a seller is scheduled to receive on the installment sale, including the down payment and each later payment of principal on any debt that the buyer assumed. It also includes payments the seller is considered to receive. This does not include interest.

The amount put into a retirement plan for the individuals participating in the plan, including self-employed individuals.

A method established under the Modified Accelerated Cost Recovery System (MACRS) to determine when the recovery period begins and ends. The convention affects a taxpayer's depreciation deduction for the year they place their property in service and the year they dispose of it.

The movement of funds from a traditional IRA to a Roth IRA.

Legal protection for artists and authors for the publication or use of their works.

Inventory at the beginning of the year, plus purchases (reduced by cost of items withdrawn for the taxpayer's personal use), plus cost of labor (not including amounts the taxpayer paid to themselves), plus materials and supplies, plus other costs, minus inventory at the end of the year.

A trust or custodial savings account that is set up to pay the qualified education expenses of a designated beneficiary. Contributions are not deductible, but earnings may be tax-free.

A presidentially declared disaster area in which the IRS has decided to postpone tax-related filing deadlines for up to one year.

The parent who has custody of a child for the greater part of the year or for the entire year.

An individual or organization, such as a bank or trust company, that is responsible for overseeing and safeguarding assets on behalf of the beneficiary or owner of the assets (for example, a minor).

The value associated with a customer base, a circulation base, an undeveloped market or market growth, insurance in force, a mortgage servicing contract, an investment management contract, or any other relationship with customers involving the future provision of goods or services.