Tax Glossary

A loss from the worthlessness of a debt. A debt becomes worthless when the surrounding facts and circumstances indicate there's no reasonable expectation that the debt will be repaid. To show that a debt is worthless, you must establish that you've taken reasonable steps to collect the debt.

The amount owed to the IRS after subtracting total tax payments from the total tax liability on a tax return.

Statement of the financial position of a business as of a particular date. The statement will show the business's assets in one column and its liabilities and owner's equity in another column.

U.S. legislation aimed at preventing criminals from using financial institutions to hide or launder money. The BSA requires financial institutions to: Keep records of cash purchases of negotiable instruments File reports of cash transactions exceeding $10,000 (daily aggregate amount) Report suspicious activity that might signify money laundering, tax evasion, or other criminal activities The BSA was passed in 1970 as the first laws to fight money laundering in the United States.

Any person or an organization with members or clients that contract with each other (or with the barter exchange), who jointly trades or barters property or services.

An exchange or property or services.

The amount of an individual's investment in property for tax purposes. Term used in capital gains tax legislation to denote the cost of an asset to an owner.

Stocks, bonds, etc. in which ownership can be transferred from one holder to another without registration of the transaction by the issuing company, that is, title passes with delivery.

A person designated to receive all or a portion of a benefit after the owner dies.

In considering whether a company may be allowed to deduct, as an expense, payments made to a related company in a multinational group on account of expenses incurred by that related company in providing intra-group services, tax authorities would refuse a deduction unless a real benefit had been conferred on the company claiming the deduction.

Term which refers to earnings, usually from employment, other than in cash, as part of compensation for services rendered.

Interest-bearing debt obligation to a government or entrepreneur. The rate of interest is usually fixed.

The value of an individual asset as recorded in the accounting records of a taxpayer, calculated as actual cost less allowances for any depreciation.

Cash or fair market value of unlike property received in an exchange.

Office or other unit of business located at a different location from the main office or headquarters. It is not a separate legal entity.

Tax imposed on branches of foreign companies in addition to the normal corporate income tax on the branch's income. This is equivalent to the tax on dividends which would be due if the branch had been a subsidiary (see: subsidiary company) of the foreign company and had distributed its profit as dividends.

Two or more companies which are owned and controlled by the same shareholders.

Assets used for purposes of carrying on a business.

A business bad debt that is either of the following: created or acquired in the taxpayer's trade or business or closely related to the taxpayer's trade or business when it became partly or totally worthless (a debt is closely related to the taxpayer's trade or business if the taxpayer's primary motive for incurring the debt is business related).

The intangible value of technical manuals; training manuals or programs; data files; accounting or inventory control systems; customer lists; subscription lists; insurance expirations; patient or client files; and lists of newspaper, magazine, radio, and television advertisers.

Costs that do not have to be capitalized or included in the cost of goods sold. To be deductible, business expenses must be both ordinary and necessary.

Test used as a weapon against tax avoidance schemes. Artificial schemes which create circumstances under which no tax or minimal tax is levied may be disregarded if they do not serve a "business purpose".