ACC250 Chapter 11 Flashcards
A ratable amount of the market discount at the time of purchase (based on the number of days the bond is held over the number of days until maturity when the bond is purchased) that is treated as interest income when a bond with market discount is sold before it matures.
ACCRUED MARKET DISCOUNT
An individual who owns at least 10% of a rental property and participate sin the process of making management decisions, such as approving new tenants, deciding on rental terms, and approving repairs and capital expenditures.
ACTIVE PARTICIPANT IN A RENTAL ACTIVITY
A taxpayer’s before-tax rate of return on an investment minus the taxes paid on the income from the investment. The formula when this is taxed annually:
before-tax rate of return(1-marginal tax rate)
AFTER-TAX RATE OF RETURN
The method of recovering the cost of intangible assets over a specific time period.
AMORTIZATION
An investor’s risk of loss in a worst-case scenario. In a partnership, an amount generally equal to a partner’s tax basis exclusive of the partner’s share of nonrecourse debt.
AT-RISK AMOUNT
A taxpayer’s unrecovered investment in an asset that provides a reference point for measuring gain or loss when an asset is sold.
BASIS
A taxpayer’s rate of return on an investment before paying taxes on the income from the investment.
BEFORE-TAX RATE OF RETURN
A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.
BOND
The result of issuing bonds for less than their maturity value.
BOND DISCOUNT
The result of issuing bonds for more than their maturity value.
BOND PREMIUM
In general, an asset other than an asset used in a trade or business or an asset such as an account or note receivable acquired in a business from the sale of services or property.
CAPITAL ASSET
The amount, if any, an owner of a life insurance policy receives when the policy is cashed in before the death of the insured individual.
CASH SURRENDER VALUE
An interest-bearing debt instrument offered by banks and savings and loans. Money removed from the CD before maturity is subject to a penalty.
CERTIFICATE OF DEPOSIT
A work of art, a rug or antique, a metal or gem, a stamp or coin, an alcoholic beverage, or other similar items held for investment for more than one year.
COLLECTIBLE
A distribution to shareholders of money or property from the corporation’s earnings and profits.
DIVIDEND
The relevant date for determining who receives a dividend from a stock. Anyone purchasing stock before this date will receive current dividends. Otherwise, the purchaser must wait until subsequent dividends are declared before receiving them.
EX-DIVIDEND DATE
A tax directly imposed by a government.
EXPLICIT TAX
A specified final amount paid to the owner of a coupon bond on the date of maturity. Also known as the maturity value.
FACE VALUE
An accounting method that values the cost of assets sold under the assumption that the assets are sold in the order purchased.
FIRST-IN FIRST-OUT (FIFO) METHOD
Legal entities like partnerships, limited liability companies, and S corporations that do not pay income tax. Income and losses from flow-through entities are allocated to their owners.
FLOW-THROUGH ENTITY
Indirect taxes that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives. They are defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.
IMPLICIT TAX
Expenses such as safe deposit rental fees, attorney fees, and accounting fees that are necessary to produce portfolio income. Allowed for individuals as miscellaneous itemized deductions subject to the 2% AGI floor.
INVESTMENT EXPENSES
