Tax Glossary

Also known as real property, immovable property comprises land, houses and buildings.

The term "impost" means tax and refers particularly to a duty on imported goods and to clarification (by customs) of (imported) goods to assess the proper (import) taxes

Property maintenance or enhancement that adds to the value of the property, lengthens its useful life, or changes it so it an be used in a new way.

The system under which at least part of the tax paid by a company on its profits is credited against the tax liability of shareholders in receipt of distributions paid by the company out of those profits.

The economic benefit a taxpayer obtains through performance of self-provided services or through the use of self-owned property.

In a mortgage that states an insufficient interest rate, tax law will impute a higher rate and a lower principal, which will increase taxes on the receipt of payment.

Broadly speaking, a distribution or payment other than in money.

An option to purchase stock that is granted to an employee for any reason connected with their employment by a corporation. This option is granted by the employer corporation or its parent or subsidiary corporation and applies to an employee's purchase of stock of any such corporation.

The person who bears the tax burden in economic sense, which could be different from the person paying the tax.

Expenses or costs that are not material expenses incurred while on business or that do not add substantial value to a gift.

Income received after the decedent's death that cannot be included in the decedent's income tax return but that would have been attributable to the decedent had they lived.

Often, real estate is bought for the income it produces.

Arrangements, the essential feature of which is that income, which would have been taxed at a higher rate in the hands of the person who derived it, is taxed in the hands of another person at a lower rate.

Statement showing the results of a business operation for a particular period of time. The statement will show the business's revenues and expenses.

All sources of income are liable to tax without taking account of tax allowances.

The process by which a company receives a government charter allowing it to operate as a corporation.

An assignment that is realistically expected to last for more than one year or that does in fact last more than one year.

Amount of money received by persons or entities as compensation for damages or for losses incurred.

A non-employee who performs services for a person. The person for which they perform services has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

Two enterprises are independent enterprises with respect to each other if they are not associated enterprises with respect to each other.

Services performed by an independent contractor. An independent contractor is hired to do work according to his own methods and is not subject to the control of an employer except as to the result of his work.

Expedient adopted in many commercial transactions to provide a workable solution to some of the problems created by inflation and monetary depreciation. The mechanism is one of adjusting payments, profits, gains, taxable income brackets, tax allowances, etc. by discounting or otherwise modifying them by reference to an accepted index of inflation or other indices.

Costs that cannot be identified in relation to a particular activity but that, nevertheless, are related to the direct costs (e.g., overhead expenses, costs of supporting departments, and a proper share of research and development (R&D) costs).

Tax imposed on certain transactions, goods or events. Examples include VAT, sales tax, excise duties, stamp duty, services tax, registration duty and transaction tax.

A method of charging for intra-group services based upon cost allocation and apportionment methods.

A personal savings plan that offers an individual tax advantages to set aside money for retirement.

A nine-digit number issued by the IRS to resident and nonresident aliens who are not eligible to get a Social Security number. An ITIN is issued exclusively for tax reporting or filing purposes.

Declaration made by a person who has economic information about a potential taxpayer, regardless of whether that person is liable for withholding tax.

Real property or personal property that is received by heirs.

An individual who files a joint return for which all or part of their share of the overpayment was, or is expected to be, applied toward their spouse's past-due federal tax, child or spousal support, federal non-tax debt (such as a student loan), or state income tax.

A taxpayer who did not know and had no way of reasonably knowing that there was an understatement of tax due to erroneous items of their spouse (or former spouse) on their joint return.

Term used in connection with VAT to denote the tax embodied in purchases made by a trader or entrepreneur who will usually be able to obtain a credit for the tax that his suppliers have paid on the goods supplied to him which form his "inputs".

Insolvency is a state of financial distress in which a person or business is unable to pay their debts. Insolvency can occur when a person's debt exceeds the value of their assets. Insolvency is different from bankruptcy, but it is criteria for bankruptcy. There are two main types of insolvency: cash flow insolvency and accounting insolvency. Insolvency proceedings include administration, liquidation, receivership, and voluntary arrangement.

The condition that occurs when a taxpayer's debts are more than the fair market value of their assets.

An agreement with the IRS to pay tax debt in smaller, more manageable amounts (installments).

A sale of property in which the seller receives at least one payment after the tax year of the sale.

A legal document.

The amount paid to an insurance company to cover potential hazards.

Receipt of proceeds of an insurance policy.

Property that has value but cannot be seen or touched, such as goodwill, patents, copyrights, and computer software

A tax based on the value of certain intangible personal property, such as portfolio income (income from stocks, bonds, mutual fund shares, etc.).

Literary, dramatic, musical, artistic and scientific works are intellectual property which is protected by copyright, patent, registered design, trade mark, etc.

A benefit provided by one associated enterprise to another associated enterprise within the group is deliberately balanced by different benefits received from that enterprise in return.

Transactions between members of an affiliated group filing a consolidated return; gain or loss is deferred until a property is disposed of outside the group.

Dividends distributed between two companies (domestic or foreign) arising from a shareholding or participation in the capital of the paying company.

The fee received for lending money, usually calculated as a percentage rate for a certain time period. Interest can be earned through depositing money in savings programs, buying certificates of deposits (CDs) or bonds, or lending money to people.

In the context of the European Union, an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured.

A weekly publication summarizing various IRS administrative rulings.

Legislation passed by US Congress that specifies what income is to be taxed, how it is to be taxed, and what may be deducted from taxable income.

An official compilation of policies, procedures, instructions, and guidelines for the organization, functions, operation, and administration of the Internal Revenue Service. The IRM guidelines do not confer any rights on taxpayers.

The agency of the US federal government that is responsible for the administration and collection of federal taxes.

An international organization established in 1945, headquartered in Washington, DC. The purposes of the IMF are, inter alia, to promote international monetary cooperation, facilitate the expansion and balance growth of international trade and promote stability in foreign exchange.

Traditionally, international taxation refers to treaty provisions relieving international double taxation. In broader terms, it includes domestic legislation covering foreign income of residents (worldwide income) and domestic income of non-residents.

Services provided by a group company to another affiliated company. The cost of general services such as management, administrative and similar services may be often allocated among the various members of the group without any profit mark-up, whereas services performed in the ordinary course of business are subject to arm's length conditions.

Property or merchandise the individual produces or purchases to sell in the natural course of their trade or business.

The purchase of stocks, bonds, mutual fund shares, real property, an annuity, collectibles, or other assets, with the expectation of obtaining income or capital gains-or both-in the future.

Allowance with respect to a qualifying depreciable asset. It adds a certain percentage of the asset's initial cost to the full depreciation write-off and is usually given in the year of acquisition or as soon as possible thereafter.

Corporation whose activities consist exclusively or substantially of making investments (i.e. holding property and collection of income therefrom) and whose buying and selling of shares, securities, real estate or other investment property is only incidental to this purpose.

Financial and tax incentives are used to attract local or foreign investment capital to certain activities or particular areas in a country.

Income derived from the investment of capital, whether money or other property, in income-producing assets or in a profit-making venture without active participation in the production of the income or in the affairs of the venture.

The interest paid for money borrowed to buy property held for investment.

Method used in connection with VAT where an immediate credit is granted against tax for that part of expenditure incurred during the year for acquisition of business assets (such as plant and machinery by a manufacturer) which related to the tax element in the price of such assets.

Generally, property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business.

This system permits eligible taxpayers to set aside part of their profits as a reserve for future investment and deduct from their income the amount of the annual contribution to the reserve.

Method of applying VAT to the price at which the goods or service are invoiced, with a deduction for the tax (if any) charged at previous stages.

The term used in the context of transfer pricing to refer to a company established in a low-tax or no-tax jurisdiction for the purpose of shifting profits to that jurisdiction.

The forced (not voluntary) disposition of property due to theft, casualty, or condemnation, and the receipt of other property or money in payment of this property, such as insurance or a condemnation award. An involuntary conversion is also called an involuntary exchange.

For a traditional IRA, the amount of nondeductible traditional IRA contributions in the person's IRA. For a Roth IRA, the amount of contributions and conversions to the Roth IRA.

Shares that have been sold to shareholders by the corporation.

In the US, a deduction as specifically set forth in the Internal Revenue Code. The deductions in this part are individually listed, item by item.