Tax Glossary

The amount received (other than worker's compensation) through prosecution of a legal suit or action based on tort or tort-type rights, or through a settlement agreement entered into in lieu of such prosecution.

The date an individual must be listed as the owner of shares in a company's records to be the recipient of the dividends to be paid.

Phrase used in connection with circumstances in which the full rigor of the tax law is not enforced because of the small amount or minor breach which may be involved, particularly in the context of under-assessed or underpaid tax which are not pursued on "de minimis" grounds.

Taxes imposed on the transfer of property on account of a person's death.

Interest-bearing bond which is not secured by any specific property, usually issued by a corporation or government to the public.

Funds obtained through several types of loans which normally comprehend debentures and bonds bearing fixed interest.

Transferring a bad debt to a group company located in a higher-tax rate country in order to write off the debt in that country.

A written promise to repay a debt, such as a bill, bond, banker's acceptance, note, certificate of deposit, or commercial paper.

Relationship of total debt of a company to its ordinary share capital. If a corporate debt is disproportionately high in comparison with its equity, the debt may be recharacterized as equity, resulting in a disallowance of the interest deduction and taxation of the funds as dividends.

A person who owes money, a borrower.

A deceased individual.

The date a company publicly announces that it will be paying a dividend.

A method of calculating the depreciation for property that applies the same depreciation rate each year to the adjusted basis of the property.

Deduction denotes, in an income tax context, an item which is subtracted (deducted) in arriving at, and which therefore reduces, taxable income.

If a member of a multinational enterprise (MNE) receives an interest-free loan from an affiliated company, the tax authorities of the lender's country may readjust the lender's profits by adding an amount equal to the interest which would have been payable on the loan had it been made at arm's length.

A qualified employer retirement plan that maintains a separate account or annuity to receive voluntary employee contributions. If this plan or annuity otherwise meets the requirements of an IRA, it is subject only to IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA.

The failure of a debtor to make timely payments of interest and principal amounts as they come due or to meet other provisions of a bond, mortgage, lease, or other contract.

The postponement of tax payments from the current year to a later year.

The voluntary contribution an employer deducts from an employee's pay that is not subject to income tax. Also called elective deferral or pre-tax contributions.

An account that postpones payment of interest to a future date.

The excess of a taxpayer's correct tax liability for the taxable year over the amount of taxes previously paid for that year.

Tax which is in default (i.e. due but not yet paid).

A loan payable on request by the creditor rather than on a specific date.

An individual, other than the taxpayer or their spouse, who entitles the taxpayer to claim an exemption.

Amounts an employer pays directly to an employee or the employee's care provider for the care of the employee's qualifying dependent while the employee works, or the fair market value of care in a daycare facility provided or sponsored by the employer.

The using up of natural resources by mining, quarrying, drilling, or felling, for which a deduction allows an owner or operator to account for the reduction of a product's reserves.

An amount that can be deducted annually that allows the taxpayer to recover the cost or other basis of certain property over the time the property is used in trade or business. It is an allowance for the wear and tear, age, deterioration, or obsolescence of the property.

These are financial instruments whose values are linked to or depend on the value of a primary (underlying) asset, e.g. debt assets, liabilities and equity securities, commodities, or currency. The primary types of derivatives include forward contracts, futures, options, and swaps.

A person who descended from an individual. For example, an individual's great grandchild is their descendent.

Cost identified with a particular transaction, such as raw materials, components and goods, wages and other processing expenses.

Description often given to a substantial investment in the shares of a company.

The transfer of a distribution made by the administrator of the distributing plan directly from one qualified plan to another qualified plan (if permitted) or traditional IRA.

An individual who can show proof that they cannot engage in a substantial gainful activity because of their physical or mental condition. A physician must determine that their condition can be expected to result in death or to be of long-standing and indefinite duration.

The difference between the amount paid for an asset and the fair market value or stated face value of that asset.

The exchange, sale, or loss of property, whether voluntary or involuntary.

An area for which the poverty rate or other conditions cause certain tax incentives to apply.

Money or assets paid out or withdrawn.

A plan that lets an investor choose to use their dividends to buy more shares of stock in a corporation through an agent instead of receiving the dividends in cash. The investor must still report the fair market value of the dividends on their tax return.

Distributions of money, stock, or other property paid to shareholders by a corporation. Dividends may also be received through a partnership, estate, trust, or association that is taxed as a corporation.

A divorce or separate maintenance decree or a written instrument that happens as a result of that decree, a written separation agreement, or a decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).

Written records that establish certain facts; for example, documents that support a tax deduction or an expense.

Corporation which is organized or has its place of effective management in a country.

The taxpayer's permanent legal home where they intend to live for an indefinite or unlimited period and to which they intend to return when absent.

A person who receives a gift.

A person who gives a gift.

The term used to indicate the possibility for dual resident companies to deduct the same expenses in two jurisdictions.

An individual who is a resident alien for part of the tax year and a nonresident alien for part of the year.

The requirement that a paid preparer must show a serious and earnest effort to obtain accurate and complete information.

Customs duties (sometimes called a tariff) levied on imported products.

Zone usually located next to an international port or airport where imported goods may be unloaded, stored, and reshipped without payment of customs duties or other types of indirect taxes, provided the goods are not imported.

Property, such as a house, an apartment, a condominium, a mobile home, a boat, a vacation home, or another similar property that has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis.