The adjusted tax basis is the value used for calculating gain or loss upon the sale or disposition of an asset, reflecting adjustments for various tax-related incentives, improvements, or expenses.
An allowable capital loss refers to the excess of the cost of an asset over the proceeds received on its disposal. Both individuals and companies may set capital losses against capital gains to establish tax liability.
Capital gains refer to the profit realized from the sale of assets or investments, which exceeds the purchase price. They can apply to stocks, bonds, real estate, and other types of investments.
Chargeable assets encompass all forms of property subject to tax on capital gains, excluding specifically exempt items such as private motor cars, National Savings Certificates, and others.
Items such as art, stamps, and antiques acquired for their aesthetic merits and potential source of capital gains and inflation protection.
Cost basis refers to the original price of an asset and is fundamental in determining depreciation as well as capital gains or losses. Typically, it is the purchase price, but in cases of inheritance, it is the market value of the asset at the donor's death.
Cost Records refer to documents that provide evidence of the prices at which investments were purchased or the costs incurred in producing goods, providing services, or supporting activities. These records are essential for calculating capital gains and substantiating financial performance.
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.
Depreciation Recapture refers to the portion of taxable capital gain from the sale of an asset, which represents the depreciation previously deducted for that asset.
Excess (accelerated) depreciation refers to the accumulated difference between accelerated depreciation claimed for tax purposes and what straight-line depreciation would have been. Generally, excess accelerated depreciation is recaptured as ordinary income upon a sale, instead of receiving more favorable capital gains treatment.
U.S. tax form used by payers to report various types of income other than wages, salaries, and tips. Examples include interest, dividends, royalties, capital gains, and miscellaneous income.
Income property refers to real estate acquired specifically for the income or cash flow it generates. It can be owned individually, by a company, or be part of a limited partnership, with buyers often aiming for long-term capital gains upon sale.
Investment income refers to the earnings generated from various types of investments, including dividends, interest, and gains made from the sale of investment properties.
An investment trust is a company that collects funds from shareholders to invest in a diversified portfolio of securities, aiming to achieve income and capital gains. While similar to unit trusts, investment trusts have several distinctive characteristics.
Nonbusiness income refers to earnings derived from passive sources such as interest, dividends, and nonbusiness capital gains, primarily used in taxation to calculate the net operating loss deduction. It includes income from investment assets separate from apportionment in multistate corporations.
Ordinary income refers to normal income earned by individuals, such as wages, interest, and rents, which is fully subject to regular income tax rates. This contrasts with capital gains, which often benefit from reduced tax rates.
Personal property, also known as personalty, refers to movable items that are not attached to real estate and can include goods used in trade or business. Gains on the sale of personal property may be taxed favorably under Section 1231 of the Internal Revenue Code.
A realized gain represents the profit earned from the sale of an asset, calculated as the difference between the asset's selling price and its original purchase price. This gain, although realized, is not always immediately subject to taxation.
A Regulated Investment Company (RIC), such as a mutual fund or Real Estate Investment Trust (REIT), is eligible under Regulation M of the Internal Revenue Service to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders to be taxed at the personal level, thereby avoiding double taxation on corporations and stockholders.
Section 1231 of the Internal Revenue Code deals with assets used in a trade or business, providing for capital gains treatment on gains and ordinary loss treatment on losses from such assets.
Selling short against the box is a strategy wherein an investor sells a stock they already own but have kept in a brokerage firm's safekeeping, known as the 'box,' to defer capital gains to the following tax year.
The simple rate of return measures the profitability of an investment by dividing the total earnings (income and capital gains) by the original amount invested. It is a straightforward way to assess the financial performance of an investment without considering compounding effects.
Tax loss carryback and carryover are tax benefits that allow taxpayers to use losses from one year to offset taxable income in other years, effectively reducing tax liability.
Tax selling involves selling securities, usually at year end, to realize losses in a portfolio, which can be used to offset capital gains and thereby lower an investor's tax liability.
A tax straddle is a technique that was once used to postpone tax liability by showing a short-term loss in the current tax year and realizing a long-term gain in the following tax year.
UK GAAP refers to the practices followed by British accountants in preparing company accounts, governed by accounting standards, theoretical accounting concepts, and legal requirements. These are increasingly critical in determining taxable profits.
Unrealized appreciation refers to the increase in the value of an asset that has not yet been sold, calculated as the excess of the asset's fair market value over its adjusted basis. This appreciation is recognized for financial reporting purposes but does not incur income tax until the asset is sold.
A systematic approach used by investors to receive fixed payments from their investment accounts or mutual funds on a regular basis, usually monthly or quarterly, often consisting of income, capital gains, or both.
