Tax Glossary

Generally, the home in which an individual lives for most of the year.

1. Expenses incurred by a taxpayer to provide for his family, former spouse, or other relatives. 2. Expenses for the upkeep or preservation of a building or equipment.

Improper or immoral conduct of a professional in the performance of his duties, done either intentionally or through carelessness or ignorance; commonly applied to accountants, tax preparers, and lawyers to denote negligent or unskillful performance of duties where professional skills are obligatory.

Expenses of management are deductible in arriving at the taxable profits of an enterprise carrying on a trade. In the case of a group of companies it may be important to decide how far the general expenses of management of the group should be charged to and recovered from the members of the group.

A fee or charge imposed for management and/or administrative services of a parent company or head office.

Generally, the age set by an employer at which an employee must retire.

Tax rate applicable to the top slice or bracket of a taxpayer's income or other taxable income, where the relevant tax on such items is levied at progressive rates.

Tax and/or accounting convention under which the value of assets/liabilities is adjusted to reflect fair market value of a specific date.

An increase in the price of something, especially from the price a trader pays for something to the price he sells it for. In the context of transfer pricing, one method to estimate an arm's length price for transactions between affiliated companies is to increase the supplier's cost by an appropriate profit mark-up (Cost-plus method).

An intangible that is concerned with marketing activities, which aids in the commercial exploitation of a product or service and/or has an important promotional value for the product concerned.

A legal union between a man and a woman as husband and wife. For federal income tax purposes, this definition supersedes any state definitions.

The satisfaction of one of several tests used to determine that a trade or business is not a passive activity. Generally, material participation in an activity includes being involved in its operations on a regular, continuous, and substantial basis during the year.

Amounts paid for the diagnosis, cure, relief, treatment, or prevention of disease and for treatments affecting any part or function of the body. The medical care expenses must be primarily to relieve or prevent a physical or mental defect or illness.

In the context of a tax treaty, a document exchanged between the treaty partners which sets out the understanding of the parties regarding the convention. Usually this does not have treaty status, but the status depends on the document itself.

Term generally used to describe a number of operations involving the reorganization of companies.

Regular payments, usually based on the volume or price of minerals extracted, are made by mining enterprises to national states or other owners of mineral resources as consideration for the right to exploit mineral resources.

The smallest amount that must be distributed from a qualified plan to prevent an additional tax on excess accumulation. Also called a required minimum distribution.

Generally, the earliest age at which a taxpayer can first receive a pension or an annuity if they are not disabled.

In certain countries, corporations are always liable to a certain amount of annual tax, regardless of whether they have realized a profit.

An individual who is duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for Social Security purposes.

Services performed in the exercise of the taxpayer's ministry or in the exercise of the taxpayer's duties as required by their religious order.

Department of government responsible for formulating monetary policy, implementing the tax laws, collecting revenue, etc.

Term used to designate an intermediate holding company the purpose of which is to "mix" income from various foreign sources in order to maximize the benefit of foreign tax credits. The mixer company receives income both from countries with a higher tax rate than that of the destination country and from countries with a lower tax rate, which it then pays out as a dividend. This structure has the effect of averaging out the rate of foreign tax paid.

Abbreviation for multinational corporation.

Abbreviation for multinational enterprises.

A model tax treaty is designed to streamline and achieve uniformity in the allocation of taxing rights between countries in cross-border situations. Model tax treaties developed by OECD and UN are widely used and a number of countries have their own model treaties.

The name given to tax rules relating to recovering, through depreciation deductions, the basis of most business and investment property placed in service after 1986.

Adjusted gross income that is modified to meet the requirements of a specific tax item. Modifications are specific for each tax item that uses MAGI.

A legal document an individual signs when they borrow money and put real estate up as collateral to protect the interests of the lender.

Tax on mortgages, usually in the form of a stamp duty levied on the mortgage document.

Test often found in tax rules which are designed to prevent tax avoidance. For example, the rules may provide that certain consequences will follow if the sole, main or principal purpose of certain transaction is the reduction of tax.

Indirect tax charged on the same goods at successive stages of production and distribution.

Company which has more than one captive insurance company.

A written agreement indicating which taxpayer can claim the dependent exemption for an individual when two or more qualifying taxpayers together provide more than half of the individual's support and individually provide more than 10% of the individual's support.

A means through which tax administrations consult to resolve disputes regarding the application of double tax conventions. This procedure, described and authorized by Article 25 of the OECD Model Tax Convention, can be used to eliminate double taxation that could arise from a transfer pricing adjustment.

In the context of tax treaties, one of the contracting states will collect taxes due to the other contracting state.

A type of regulated investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. Also, a portfolio of securities held by an investment company on behalf of investors.