ACC250 Chapter 5 Flashcards
Nontaxable early receipt of life insurance benefits if taxpayer is terminally ill.
ACCELERATED DEATH BENEFITS
A method of accounting that generally recognizes income in the period earned and recognizes deductions in the period that liabilities are incurred.
ACCRUAL METHOD
A support payment of cash made to a former spouse. The payment must be made under a written separation agreement or divorce decree that does not designate the payment as something other than alimony, the payment must be made when the spouses do not live together, and the payments must cease no later than when the recipient dies.
ALIMONY
gross income means all income from whatever source derived.
ALL-INCLUSIVE DEFINITION OF INCOME
A stream of equal payments over time.
ANNUITY
Doctrine holding that earned income is taxed to the taxpayer providing the service, and that income from property is taxed to the individual who owns the property when the income accrues.
ASSIGNMENT OF INCOME DOCTRINE
Organizations that facilitate the exchange of rights to goods and services between members.
BARTER CLUBS
Method of accounting that recognizes income in the period in which cash, property, or services are received and recognizes deductions in the period paid.
CASH METHOD
Doctrine stating that income has been realized if a taxpayer receives income and there are no restrictions on the taxpayer’s use of the income.
CLAIM OF RIGHT DOCTRINE
Systems in which state laws dictate how the income and property is legally shared between a husband and a wife.
COMMUNITY PROPERTY SYSTEMS
Doctrine providing that a taxpayer must recognize income when it is actually or constructively received. Deemed to have occurred if income has been credited to the taxpayer’s account or if the income is unconditionally available to the taxpayer, the taxpayer is aware of its availability, and there are no restrictions on taxpayer’s control over the income.
CONSTRUCTIVE RECEIPT DOCTRINE
Sometimes called sick pay or wage replacement insurance. It pays the insured for wages lost due to injury or disability.
DISABILITY INSURANCE
Debt forgiveness
DISCHARGE OF INDEBTEDNESS
Compensation and other forms of income received for providing goods or services in the ordinary course of business.
EARNED INCOME
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
Noncash benefit provided to an employee as a form of compensation. Taxable, as a rule though certain of these are excluded from gross income.
FRINGE BENEFITS
A transfer of property where no, or inadequate, consideration is paid for the property.
GIFT
Realized income reduced for any excluded or deferred income.
GROSS INCOME
Income from an economic benefit the taxpayer receives indirectly rather than directly. The amount of the income is based on comparable alternatives.
IMPUTED INCOME
A transfer of property when the owner is deceased (the transfer is made by the decedent’s estate).
INHERITANCE
A sale for which the taxpayer receives payment in more than one period.
INSTALLMENT SALE
The common name for state and local government debt.
MUNICIPAL BOND
Tax laws that allow taxpayers to permanently exclude income from taxation or to defer recognizing realized income until a subsequent period.
NONRECOGNITION PROVISIONS
Plans meeting certain requirements that allow compensation placed in the account to be tax deferred until the taxpayer withdraws money from the account.
QUALIFIED RETIREMENT ACCOUNTS
The proposition that income only exists when there is a transaction with another party resulting in a measurable change in property rights.
REALIZATION PRINCIPLE
The portion of proceeds from a sale (or distribution) representing a return of the original cost of the underlying property.
RETURN OF CAPITAL
The amount of a taxpayer’s unrecovered cost of or investment in an asset.
TAX BASIS
Holds that a refund of an amount deducted in a previous period is only included in income to the extent that the deduction reduced taxable income.
TAX BENEFIT RULE
Income from property that accrues as time passes without effort on the part of the owner of the property.
UNEARNED INCOME
The ability of resources to pay taxes due from a particular transaction.
WHEREWITHAL TO PAY
