Tax Glossary

Financial transaction whereby an enterprise sells its debt-claims to a third party in order to obtain cash (although less than the full amount of the debt). The third party then assumes responsibility for the administration and collection of the debt on the due date for its own account.

The price that property would sell for on the open market or the price that would be agreed upon between a willing buyer and willing seller, with neither being required to buy or sell and both having reasonable knowledge of the relevant facts.

Generally, an amount that an individual (who is not related to the property owner) is willing to pay to rent property. If the rental price is substantially less than for similar properties in the same area, it is not considered a fair rental price.

The amount an individual could reasonably expect to receive from a stranger for lodging. Fair rental value includes rent or taxes, interest, depreciation, pain, insurance, utilities, or the cost of furniture and appliances. In some cases, fair rental value may be equal to the rent paid.

A trade or business involving the cultivation of land; raising or harvesting any agricultural or horticultural commodity; operating a nursery or sod farm; raising or harvesting trees bearing fruit, nuts, or other crops; or raising or harvesting ornamental trees. Farming businesses also include the raising, shearing, feeding, caring for, training, and management of animals.

A daily publication by the U.S government that prints the regulations of the various governmental agencies.

Generally, an amount paid for the benefit of an individual to aid in the pursuit of study or research.

A person, company, or association holding assets in trust for a beneficiary.

An examination of a tax return by tax authorities at the taxpayer's place of business.

Method of valuing inventory based on "first in, first out", where goods or materials purchased first are regarded as those which are sold first.

Factors that determine whether a taxpayer must file a federal individual income tax return.

The tax return status used to determine a taxpayer's filing requirements, standard deduction, applicable tax, and whether the taxpayer is allowed to claim certain other deductions and credits.

Lease where the lessor is considered only as a financier. The lessee is regarded as the owner of the leased assets.

Report which contains all the financial information about a company. The report consists of a balance sheet, income statement and may include other information as well.

The makeup of the right-hand side of a company's balance sheet, which includes all the ways its assets are financed.

The inability of an individual to manage their financial affairs because of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

Part of economic policy which relates to taxation and public expenditure.

"Looking through" an entity and attributing profits and losses directly to the entity's members. The profits of certain forms of enterprises are taxed in the hands of the members rather than at the level of the enterprise. Often occurs in the case of a partnership for example.

A 12-month period ending on the last day of any month except December.

Assets that are held by an enterprise either continuously or for an extended period, more than one year.

Income which does not fluctuate over a period, such as interest on bonds and debentures, or dividends from preference shares as opposed to dividend income from ordinary shares.

A tax applied at the same rate to all levels of income. It is often discussed as an alternative to the progressive tax.

A legal business entity that passes any income it makes straight to its owners, shareholders, or investors. As a result, only these individuals, and not the entity itself, are taxed on the revenues.

A procedure by which the lender either takes title to or forces the sale of the borrower's property in satisfaction of a debt.

Usually any territory (including the air space and territorial waters) under the sovereignty of a government other than that of the United States, including the seabed and subsoil of those submarine areas adjacent to the territorial waters of a foreign country and over which the foreign country has exclusive rights under internationals law to explore and exploit the natural resources.

Exchange traded contract for the delivery of a standardized amount of foreign currency on a specific future date. The price for the foreign currency is agreed on the day the contract is bought or sold. Unlike forward contracts, futures are tradable, reflecting the standardization of contract size, specification and delivery date.

An agreement under which two or more parties agree to exchange the specified amount of two different currencies for a defined period. Over the term of the agreement, the parties exchange fixed or floating rate interest payments in their swapped currencies.

Special tax imposed on transactions involving sales of foreign exchange by domestic banking institutions and authorized exchange brokers.

A method of relieving international double taxation. If income received from abroad is subject to tax in the recipient's country, any foreign tax on that income may be credited against the domestic tax on that income. The theory is that this means foreign and domestic earnings of an entity will as far as possible be similarly taxed, although usually the credit allowed is limited to the amount of domestic tax, with no carry over if tax is higher abroad.

Relief from domestic tax on income from abroad which has already suffered foreign tax. Generally speaking, two approaches are taken to foreign tax relief, i.e. the credit method or the exemption method.

income realized from countries outside the country of residence of the taxpayer.

Contract for the delivery of an amount of asset (e.g. foreign currency, securities, commodities) on a specific future date.

Nearly all states in the US levy an annual franchise tax on resident and non-resident corporations for the privilege of the right to do business in that state.

Tax fraud is a form of deliberate evasion of tax which is punishable under criminal law. The term includes situations in which deliberately false statements are submitted, fake documents are produced, etc.

A form of additional compensation for the performance of services.

A tax position that is knowingly advanced in bad faith and is patently improper.

The term used to describe the practice of interposing a third party in a transaction to circumvent transfer pricing legislation.

A period of 24 consecutive hours, beginning at midnight.

An individual attending an educational institution who meets the definition of full-time attendance for that institution.

An analysis of the functions performed (considering assets used and risks assumed) by associated enterprises in controlled transactions and by independent enterprises in comparable uncontrolled transactions.