In the USA, alimony payments in a divorce settlement are treated as deductions from the adjusted gross income by the payer, but the recipient treats them as income for tax purposes.
Away from home refers to scenarios where sleeping arrangements are necessary for at least one night before returning home, allowing for the deduction of 'ordinary and necessary' travel expenses on a business trip.
Constructive dividend involves the disallowance or reclassification of a transaction between a closely held corporation and a shareholder, often recharacterizing a loan to a stockholder as a dividend.
Constructive ownership of stock refers to situations in which a taxpayer is treated as owning shares that are actually owned by another person or entity, due to the application of specific tax rules, also known as attribution rules.
Constructive Receipt of Income is a doctrine where a taxpayer must include in gross income amounts that, though not actually received, are deemed received during the taxable year. This principle ensures that taxpayers cannot defer taxation by simply delaying the physical receipt of income.
Deferred gain refers to any gain from a transaction that is not subject to tax in the year it is realized but is instead postponed until a future period.
A taxpayer who was divorced under a final decree of divorce or separate maintenance by the last day of the tax year; considered unmarried for the entire year for tax purposes.
A Generation-Skipping Transfer (GST) involves the transfer of financial assets or property to a recipient who is more than a single generation removed from the transferor, potentially incurring the generation-skipping tax (GSTT).
Gift splitting is a tax strategy that allows a married couple to combine their individual annual gift tax exclusions and unified estate and gift tax credits, enabling them to give a larger gift to a recipient without incurring gift tax liability.
A hobby loss refers to losses incurred by a taxpayer in an activity not pursued for profit. Hobby losses are deductible only to the extent of income generated by the hobby. An activity that generates a profit in three of five years is presumed to be operated for profit.
Household workers are individuals employed to perform domestic work in a private residence, such as nannies, housekeepers, and caretakers. Notably, federal income tax withholding is not required on payments made to household workers, but Social Security taxes must be paid.
Expenses that are deemed not reasonable based on the facts and circumstances, which are subsequently not tax-deductible by law.
A taxpayer who was legally married as of the last day of the tax year. This status impacts their ability to file a joint tax return and affects their tax liabilities and deductions.
Mileage (Tax) refers to the deduction that taxpayers can claim for the business use of their vehicle, either by using the actual expenses method or the standard mileage rate method.
An in-depth look into Passive Activity Loss (PAL), including definition, examples, frequently asked questions, related terms, online resources, and suggested books for further studies.
Perquisites of Office, also known as fringe benefits, refer to the advantages or benefits provided by an employer to an employee, which are above their regular wages or salary. When these benefits are used for personal or family purposes, they are taxable.
In determining taxable income, an individual taxpayer is entitled to a deduction for each allowable personal exemption. This exemption reduces the amount of income subject to tax and can be claimed for the taxpayer, their spouse, and each dependent.
A qualified transfer refers to any amount paid for an individual's education or medical care that is not considered a taxable gift for gift tax purposes.
A thin corporation primarily uses loans from shareholders for its capital rather than equity investments to enjoy tax advantages. This can lead to tax challenges if debt-to-stock ratios surpass acceptable industry standards.
Under-reporting is the improper failure to report accurate income on a tax return, leading to potential legal and financial consequences.
A wash sale is a transaction where an investor sells a security at a loss and quickly repurchases the same or substantially identical security within a specific period. This rule prevents taxpayers from claiming a tax deduction for the loss.
